Today we are applying a Bull Call Spread on BlueScope Steel Limited (BSL)
Analysis:
BSL is currently trading at $12.08.
BSL is trading in short term uptrend. Recently it tested both a key level of support and the uptrend line that comes in around $11.60. Today shows a break of the counter trend line, and therefore a break of a short term pennant pattern. This provides an indication BSL is likely to continue higher to its local resistance at $12.60. The fact it is also trading in an uptrend could also mean that it is likely to go beyond that resistance, but we would be making the decision to either take the profit or let it run, if and when that occurs.
BSL can go for runs, but it can also be rather whippy – like what we have seen most recently in the market. Instead of simply buying the stock and risking a huge amount of capital for such a small movement, we can instead trade a Bull Call spread. This strategy is not only leveraged so we can profit by the next resistance, it also can profit from time decay. It can basically profit from sidewards movement if set up correctly. This helps counter the slow grind we might see before reaching the next resistance.
If you would like to learn how and when to use this strategy, and other strategies like it, then please contact us here at TradersCircle on 03 8080 5788. Alternately, you can download a free eBook by clicking here which runs through advanced strategies.