Today we are considering applying a Bull Call Spread on Fortescue Metals Group Limited (FMG)
Analysis:
FMG is currently trading at $11.11.
FMG has broken the short-term counter trend today, bouncing off a clear support level and continuing the uptrend. It has also completed a morning star candle pattern which is a bullish reversal signal. The stochastic indicator is in the oversold area and have crossed indicating a change in direction from the recent bearishness. It has also bounced off the 50 day MA (green line) which has acted as buying support in the past. There was also good volume on the breakout today.
We are obviously expecting FMG to rally from here, especially with a strong rebound in Iron Ore prices. That being said, it may be short lived due to the coronavirus and we would want to be out before the report.
We could trade a Bull Call spread where we can take advantage of time decay, but still be leveraged for a good return on a rally. This provides flexibility in case we see any short-term consolidation.
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.