Call Options Favoured As General Electric Forms A Bullish Triangle

Call Options Favoured As General Electric Forms A Bullish Triangle
February 17, 2015

 
NYSE:GE (General Electric) is the asset in focus today, as I would like to trade call options on this with a medium to short term expiration date.

The reason for this is that this is a so called “defensive stock”, which is a type of stock that provides a constant dividend and stable earnings regardless of the overall state of the stock market.

Look at the equity indexes and see the rise they had in the last few months. However, GE did not follow and it continued to develop its global divisions.

It seems that GE is forming a corrective wave, a so called triangle. In a triangle, we should look only for corrective waves for all the legs of the triangle, and in this case the previous leg seems to be a double combination.

Therefore, starting with August last year, the triangle mentioned above is a bullish one. It has already completed three waves (a,b and c) and is now it is going for the d wave.

Taking into account the fact that in a contracting triangle like this, at least three waves should retrace a minimum 50% of the previous one, then the path of least resistance is that this stock is going for the 26-26.50 area, while now the price is around 25$/share.

Once again, this trade here is only a technical one, but fundamentals should not be disregarded.

The FOMC minutes will be released tomorrow, and if Fed members signal that the rates are not going to be increased at the March meeting, then the entire equity markets, at least in the United States, should react to the upside.

The Dow Jones and S&P500 are already at all time highs, and such a move from the Fed could only add fuel to the fire.

It remains to be seen how markets will react, but from a technical point of view GE is a buying and therefore call options with end of month expiration date should be the name of the game.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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