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Analysis:

QBE is currently trading at $10.96.

QBE has been trading in an uptrend since the 2020 covid crash. It may also arguably be trading in a broad ascending channel, which helps define a broader trading range. Recently it pulled back from key support at roughly $12.75 to return to both a key support and uptrend line which comes in at roughly $10.00. The selloff was likely caused by broader market selling, flooding in QLD (QBE is an insurance company) but also a rotation from Financials in Materials. With the market so volatile, investors were likely unwilling to bring new capital into he market, and instead reweight and rotate into different sectors. Materials were going strong and the financials were lamenting. The past week or so has seen financials like QBE pause, stall, and rally as the materials have sold off. There are of course other underlying reasons as well. Regardless, QBE has broken the pennant pattern (characterised by the uptrend and countertrend line) with strong bullish momentum.

To trade this, we would hesitate against a strong directional trade, and instead hedge a little. This could translate to doing a Bull Call spread, where profit is made from a bullish movement in QBE, but also sideward movement.

Here is the setup:

  • Max Risk: $4,305
  • Max Reward $2,695

But with only a 1% rise in share price, the profit increases overtime. The first target would be roughly $11.50 where 20 to 25% profit is made. I would likely suggest a stop of $10.75 as it is a historic support level where minimal damage is incurred.

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 trading resources by clicking here.