Unusual Pattern of the Day: 21st Century Fox Inc (FOX)
Media giant 21st Century Fox (FOX) has seen shares trade largely sideways over the past few months. However, a chart pattern suggests that the worst is over, and that shares are likely to rally.
The pattern? A golden cross. This simple pattern occurs when a stock’s 50-day moving average crosses over the 200-day moving average. With shares looking volatile so far this month, the golden cross provides a stronger longer-term hint that shares should be trending higher.
With shares looking near the middle of their multi-month trading range, and with a neutral reading on the stock’s relative strength index, a trend higher in the next few months is likely.
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Action to take: Shares trade around 10 times earnings and yield 1.7 percent here, a nice entry point for shareholders looking to play a gradual uptrend over the next few months.
For options traders, the January 2021 $30 calls are an inexpensive bet here. With a bid/ask spread around $0.70, the option should create mid-to-high double-digit returns as shares trend higher. The option also stands a strong chance of moving in-the-money in the next few weeks, but given the short timeframe of the option, it’s best to just grab a quick swing higher and take profits.