Trading a Bullish Siemens with Call Options

Trading a Bullish Siemens with Call Options
March 23, 2015

 
Siemens (XETRA:SIE) has found itself in a delicate position despite the fact that Germany’s stock benchmark, the XETRA DAX index is trading into record territory.

The fact that Xetra is at all time highs is not surprising as the ECB (European Central Bank) took the QE (Quantitative Easing) baton from the Federal Reserve in the United States.

The absolute direct effect of a QE program is to inflate assets, and equity markets are the assets to be inflated. As a consequence, the Dow Jones and S&P 500 in the United States are trading in record territory even after Federal Reserve ended the stimulus.

The Nikkei in Japan is doing the same, and now that the ECB is starting its own quantitative easing program, the Xetra Dax in Germany is at all time highs too. However, this is no good news for Siemens as internal problems are still weighing on the company’s share price and an important level plays tricks on traders: the 100 level.

Siemens is facing increasing law suits facing its acts in various markets, Mexico being only one example, and this is creating a negative picture about the way business is conducted, with the allegations of bribery for gaining contracts taking center stage.

From a technical point of view, markets always find difficult to overcome important levels, or round numbers, and SIE is finding itself right at such number: the 100 mark. There is always difficulty overcoming such a level but SIE is doing that, or is about to, as they are forming a technical pattern that indicates a move up is about to happen.

The pattern is called a running variation of a contracting triangle, and while the name sounds complicated, its implications are fairly straightforward: by the time the triangle is broken, the market should go aggressively higher but in doing that it is forming a top related to the 161.8%-261.8% levels related to the biggest leg of the triangle.

This means that we should be bullish on Siemens moving forward, and my take is that the bullish move is going to last for as long as the QE program in Europe lasts.

I would favor call options from lower levels and the striking price I am interested in is the 98 level as the “e wave” in such a triangle should not end below that level. In April, I suggest buying call options with end of month expiration date for XETRA:SIE.

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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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