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Analysis:

QAN is currently trading at $4.54.

QAN has been trading in a broad channel since arguably late 2020. Recently QAN fell to the bottom of the channel at roughly $4.30 with the overall market selldown.

The past couple of days has seen QAN bounce from the bottom of the channel whilst breaking the short-term countertrend line.

Today shows strong buying and there is plenty of room to the next resistance at roughly $4.70 to $4.80. The short-term stochastic are in the oversold area, have just crossed, and are pointing up – indicating both a change in direction and willingness to rise out of the oversold area.

Earlier today we recommended this trade to our clients. Considering the uncertainty generally underpinning markets we looked to trade this in the medium term rather than trading a quick snap up. Therefore, we suggested a Bull Call spread with expiry out to September. Of course we can close early, but unless there is any major shocks in the oil space we expect QAN over the next while to recover some ground.

Here is the setup:

  • Max Risk: $3,750
  • Max Reward $6,125

The payoff matrix below shows pure profit and loss with $4.54 being the current share price. If we see a move higher over the next few weeks back to the next resistance at $4.80, we can look to profit roughly 25%. Otherwise, if we see a break of the bottom of the channel we are looking at a similar loss. It’s a good idea before entering these types of leveraged positions to know when you are getting out for both a profit and stop loss.

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 access our free resources which runs through advanced strategies.