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Trade Of The Week: Long Call on CSL

December 2, 2020

Trade Of The Week: Long Call on CSL

CSL has been trading above a long term positive sloping support line since December 2018. This support line managed to hold during the coronavirus sell-off in February/March and is likely to be tested again in the coming days.

CSL has been trading above a long term positive sloping support line since December 2018. This support line managed to hold during the coronavirus sell-off in February/March and is likely to be tested again in the coming days.

Recently, CSL reached a recent high of $320.42 on the 24th of November 2020 and has since fallen to $296.26. We see the support at $292 this week and $293 next week. Once the stock hits this support level we expect it to rise quickly.

Source: Implied Volatility

CSL’s stock price has a history of bouncing off the 50 Day MA when approaching from the top, and bouncing off the 50 Day MA when approaching from beneath. This can be seen in the price action from the previous ‘golden cross’ on the 2nd of May 2019 until the pullback during March 2020. (This pullback was irrational in the sense that Australia’s leading biotech company would somehow be worse off in a pandemic).

Now that there have been several vaccine announcements de-risking the market (including some candidates that CSL will produce for Australians), we expect the price action to resume bouncing off the 50 Day MA following this bounce of it’s long term trend line. When this occurs, we expect the 200 Day MA to be unable to constrain the positive price momentum, being below the 50 Day MA.

When the stock hits support and starts to bounce we will enter the trade. Given the current restrictions on TMC’s we will enter into a long call position and target a price of $320 with a short term expiry date of 17 December 2020.

Enter Position when CSL hits support:
Buy CSL ATM 17 December 2020 Call (A)

If CSL rises very quickly towards $312 you can consider closing the position before expiry. If the stock reaches $318, close the position to lock in the profits

Source: Implied Volatility

If you would like some more information on options trading strategies, call 1300 805 795. You can also follow this link for a detailed tour of the Implied Volatility platform.  

To try trading for yourself using the most powerful Options Trading technology in Australia, click here for a trial for our Implied Volatility platform

We wish you good luck with your trading, and as always if you have any questions, please feel free to contact our trading desk on (03) 8080 5795. Please note, we provide General Advice only. 

 

Past performance is not a reliable indicator of future performance. The opinions expressed in this article are our personal views. 

Trading options is not suitable for everyone. There is a risk that you can lose more than the value of a trade or its underlying assets. You should only trade if you are confident that you fully understand what you are doing. If you are thinking about acquiring a financial product, you should consult our Financial Services Guide (FSG) at www.reachmarkets.com.au first. 


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