An increased in worries will often bring with it volatility. And volatility often brings with it increased trading. Volatility often spurs folks to hedge positions as well. All of this is a potential benefit to options and futures houses like CBOE Holdings (CBOE). I've known an increasing number of stock traders to start adding in options, futures and commodities to the mix of items they trade, so looking at this potential push higher on CBOE isn't a complete shock.
The move on CBOE appears to be short-term. The strength the last few days while the overall market has been stale should catch the eye of many traders. Monday saw CBOE shares break out higher from a small descending triangle pattern on an uptick in volume. The Relative Strength Index (RSI) made a nice push, although a follow-through up above 70 is needed. While there is some resistance at $61, I see this playing out to near $63 as long as the stock continues to make closes above $58.50. A move back below $57 and the bull thesis is dead. Down there, a strong bearish thesis would be worth examining as the stock will likely fall into a short-term trading range between $55 and $57 before ultimately heading back to $50.
There's another reason why I like CBOE and this is a much longer-term view. The focus here is on the areas in yellow. While they don't match perfectly, they do rhyme quite well. We have a similar pattern in not only price, but also the slow stochastics, the RSI and the MACD. This setup in the first half of 2014 was the launching pad for a huge move in the second half of the year. Is 2015 the same? The first half struggled yet again after posting higher early in the year. The bottom came around four months after the top. The MACD dipped to precisely the same low while the RSI dipped just a bit further; however, the two were very close.
Overall, though, I would challenge someone to find a more similar pattern. Just because they are similar does not mean they will repeat, but the $55 level is the clear bull killer once again. Until the similarities are proven wrong, I want to take a shot at this one, because even if it only rhymes this time, CBOE could provide a very nice second-half run in a tough trading environment. I'm looking at adding this one today near the close as long as it is trading above $58.50.