We had a story here a month ago in Livewire about Suncorp. The article was titled “Is Suncorp about to be a great shorting opportunity?”. At time of writing, the stock is down over 8% since then and today’s sell-off suggests that there is further to fall. We have recently bought some put options in another top 20 stock with a view to take advantage of a falling share price.
It may not have the same profit potential for us as shorting Suncorp, but NAB seems to be struggling here. Of the big 4 banks, NAB is like the wounded Gazelle – its recent share price performance lagging behind the pack. After peaking in May and then falling, NAB then failed to bounce as well as the other big 4 banks. You will notice on this chart that it can only rally back up towards the 38.2% retracement level. This leads us to believe that since falling from the peak in May, NAB is going to make a 5-wave decline. This bounce from the last few weeks in NAB therefore looks like a "wave 4". This means that NAB is likely to make a 5th wave by falling from here and making a new low in the $28's. It may not be a huge move, but one worth considering when it comes to buying puts or hedging your stock position with covered calls.
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Michael Gable is managing director of Fairmont Equities. We are a small boutique advisory that uniquely combines both fundamental and technical analysis. As a result, our analysis is featured regularly in the finance media such as the Australian...
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