Treasure Chest | Jul 19 2012
By Michael Gable
The last few days on the market have seen a stellar performance by the "safe' high yielding stocks. If we look at CommBank ((CBA)), from early June, we can see that a breakaway gap was created down under $49. After experiencing a continuation gap two weeks later, the stock continued to rally hard. From here we can see obvious divergence with the RSI, where the share price has gone to a new high, but the momentum was trending down. The stock has how gapped up once more to form an exhaustion gap, with a lot of volume coming in on Tuesday (circled). This means that after rallying 14% in two months, there are lot of investors out there suffering from a "fear of missing out". As a result, the price has taken a final run up towards the top. You only have to look at BHP's last move up to $50 last year to see a similar situation.
Therefore if you are holding the shares for a dividend next month, there is an opportunity to write a covered call here to pick up some more income. At the moment the $52.01 European August Call is selling for about $2. So once CBA goes ex dividend, if it has still fallen enough to be under $52.01 by expiry, you keep that $2. You therefore get the dividend (which last year was $1.88), plus another $2.
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Visit Michael Gable's website at www.michaelgable.com.au/.
After leaving Macquarie Bank's Securities Group in 2008 after many years of service, Michael has gained a highly regarded reputation in the financial services industry. As a Private Client Adviser with Novus Capital, Michael has become a popular live commentator and analyst for Sky News Business Channel’s “Your Money, Your Call” program. He is also the author of the weekly stock market report “The Dynamic Investor”.
Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management.
Michael deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
Disclaimer
Michael Gable is an Authorised Representative (Rep. No. 376892) of Novus Capital Limited AFSL 238168 ACN 006 711 995. Michael Gable and Novus Capital Limited, their associates and respective Directors and staff each declare that they, from time to time, may hold interests in securities and/or earn brokerage, fees, interest, or other benefits from products and services mentioned in this website. This website may contain unsolicited general information, without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you must consider the appropriateness of the information in this website or the Product Disclosure Statement (PDS) or Financial Services Guide (FSG), having regard to your objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance. Michael Gable and Novus Capital Limited believes that any information or advice (including any securities recommendation) contained in this website is accurate when issued but does not warrant its accuracy or reliability. Michael Gable and Novus Capital Limited are not obliged to update you if the information or its advice changes. Michael Gable and Novus Capital Limited and each of their respective officers, agents and employees exclude to the full extent permitted by law, all liability of any kind, in negligence, contract, under fiduciary duties or otherwise, for any loss or damage, whether direct, indirect, consequential or otherwise, whether foreseeable or not, to the extent arising from or in connection with this website.
