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Today we are applying a Bear Call spread on Telstra Corporation Ltd (TLS).

Analysis:

TLS is currently trading at $3.23.

You can see from the chart below that TLS has struggled to get through the key resistance level of ~$3.25 for the past 12 months or so.

Recently it has come back up to the resistance level and once again stalled.

You can also see that some of the main Moving Averages (200, 100, 50) have converged. These can often act like magnets, and pull the stock back towards them.

Instead of just shorting the stock, instead, we can trade a Bear Call. The reason why we may prefer this is that TLS could easily go sidewards instead of falling straight away. We can take a defensive position and place our risk above the $3.25 level, so that if TLS remains below it until the expiry of the trade we can make maximum profit.

In addition, if TLS does fall, then we can look to take an early profit as well.