Samsung Electronics Co. Ltd. (SMSN) is listed on the Xetra Dax, the German equity stock market index, and they are looking bullish from a medium-term perspective. I am favoring call options for the stock followed by a put option after prices move a bit higher.
The South Korean conglomerate is one of the biggest, (if not the biggest), players in the world’s electronics market and they are active in virtually all fields. This includes televisions and lucrative smartphone markets, and even other applications such as white goods.
This may be viewed as a strength but some analysts are looking at this diversification to be a weakness. This is in the sense that it is really difficult to compete in all these areas and still be competitive. However, Samsung seemed to manage this very well so far, and they have stayed on top of almost all its divisions. Look at their sales numbers in the company reports for more insight into this.
Expansion into new areas, like Samsung Pay, was cheered by investors as that market is viewed at approximately 1 trillion dollars in two years from now. With this bold move, the company intends to steal some market share from rivals Apple and Huawei.
According to internal reports from Samsung, the initial numbers are well above expectations both in numbers of people subscribing to the service, as well as the number of actual transactions taking place. This should be viewed as generally bullish for their income stream. The electronic payments market does clearly represent a potential new cash cow for the company.
There was a bit of a frenzy recently in terms of stock buying, as Japanese stocks ended more than 7% up this week. The US and Europe seem to follow. These kinds of moves ahead of the Fed September meeting can be in anticipation of a rate hike delay, but nevertheless, stocks are being bought on any dip.
From a technical point of view, the stock is at around €430/share level after flirting with the €600 mark in April, and the €400 level acted as a support as well.
Judging by the velocity of both the moves to the upside and the downside, there is a potential head and shoulders pattern that is forming with the right shoulder just starting.
Therefore, I am favoring two trades for Samsung:
- A call option from the current €425 area with a one-month expiration date.
- When the 500 level is reached, place a Put option with a one-month expiration date.
There is a strong tendency for the right shoulder to reject prices on the same level, just as they were rejected on the left shoulder, so this is what we’re trading here.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
