Maersk (MAERSK-B) is at a pivotal level as the 10,000 mark and is at a line in the sand for both bulls or bears that are looking for direction from this level.
We are talking about an iconic company whose share price is viewed as a benchmark for the global economy. This is because it is the largest container ship and supply vessel operator in the world. In other words, it’s strongly correlated with the global economy, and if one is looking for a downturn or pick-up in global economic growth, then companies like Maersk offer a pretty good idea.
With almost one hundred thousand people employed and doing business in one hundred and thirty countries, Maersk has five core businesses: Maersk Line, Maersk Oil, Drilling, Terminal, and Shipping Services. Together they generated around fifty billion dollars in sales last year which tells a lot about the size of the company.
While the oil business is suffering around the globe due to lower oil prices, Maersk Oil agreed to buy African oil assets for $845 million in order to cope with the declining output in the North Sea. This comes together with the announced plans to cut 12% of the staff as again, lower oil prices throughout 2015 made companies rethink their business model and adapt to this new trend.
Being the biggest container ship operator means that it is strongly involved in the Chinese market as the world’s biggest manufacturer uses sea transportation for dispatching its goods all around the world. With the Chinese economy likely to slow to 6.5% next year and then further to 6.2% in 2015, Maersk will most likely suffer as well.
As mentioned at the beginning of this article, Maersk share price is just shy below the pivotal 10,000 mark and if we look back further throughout the year, it’s visible that price was moving only to the downside. This makes looking for put options from current levels difficult but I would buy put options on any spike to 10,500 or even 11,000 as any correction should be short-lived as part of a possible zigzag pattern.
Monetary policy plays an important role as well, but I would say that the two main driven factors are: China and oil. No sign of improvement on both fronts makes Maersk’s share price vulnerable.
Use a one-month expiration date from the moment that the striking price is reached.
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.
