We are facing a stage where we are not sure if index will keep support levels or we will start a new downside movement.
For medium-long term positions, it is time to be hedged, and even to look for new positions through Bull Puts, always in stocks with good fundamentals.
But there are many stocks that are suffering this lateral movement much worse than others. Mainly, these stocks belong to sectors that has suffer during the crisis, such financials or construction.
In those stocks, we can find oportunities to trade through bearish strategies.
KBH (KB Home)
This company, from residencia construction sector, yesterday broke down support levels, and it did strongly, mainly due to the bad economic data of New Home Sales.
If the Index finally go down, this stock will sink. And in case the Index keep support levels, my expectation is that KBH will move slightly bearish.
From Sentimental point of view, we have a bearish sentiment over this stock that can push down the price. And from Technical point of view, in the chart we can see how the price has broken down the $15 level, and next level could be about $13, our target.
My proposal would be to start with a directional trade: BTO Long Put JAN 12.5 ($1.10) –> Updated in Market opening ($1.00)
Primary exit: 20% ROI (target around 13)
Secondary exit: if price does not move strongly to the downside, I would adjust to a Put Calendar.
Another stocks with low Fundamentales and starting a bearish movement, where we could apply similar strategy, are: ANR, PFG, SU and ZION.
SharkOpciones.
Disclaimer: this strategy is only for educational purposes and must not be considered as trade recommendation.
