Today we are looking at applying a Bull Call on Northern Star Resources Ltd (NST).
NST is currently trading at $11.
NST is a gold mining stock, similar to NCM which we recommended a Bull Call spread on last week. Clients who entered that trade closed yesterday and made roughly 26%. NST has not run as hard as NCM, and coupled with the technical the chart is showing is getting ready to play catch up.
In terms of technical analysis, NST has broken the downtrend, and is in the early stages of an uptrend – much like gold futures. It has been hovering around the uptrend line recently and despite the bearish move today (the whole market was down), it should still be considered for a bullish trade.
A Bull Call spread profits from bullish and sideward movement. The longer NST takes to rally, the less of a rally it needs in order to take a good profit. Considering it tends to track sideward and lag, this ability to profit from time decay helps. A conservative approach would be to take profits at the key resistance at roughly $11.60, but if momentum gets behind NST (common for miners), then it would be reasonable to expect that level to break. Considering the position at that point would still be time decay positive you could continue to hold. In this case, use the uptrend line as a stop trigger, so that you can maintain the position until either maximum profit is achieved, or the uptrend line breaks.
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 off our website which runs through advanced strategies.