Alpha Recommendation: Short SNP500 using warrants

*** GENERAL AVICE ONLY***

Trade Date: 30/05/2024

Citimini SNP500 Warrants are Warrants that track the underlying SNP500 Futures. For each 1 point that the underlying SNP500 futures moves, the SNP500 Warrants move 1c (USD), which is approximately 1.5c AUD. We are buying the SPFKOW. These SNP500 Warrants have an effective gearing rate of 94% and have an inbuilt stop loss at 5383 (Based on June SNP500 Futures)

Recommendation

Buy SNP500 Warrants (SPFKOW)

Entry price: $4.90 (5264 spot)

Target Price: $7.35 (5100 spot, +50%)

Stop Loss: $3.20 (5375 spot, -35%). Use a 20% trailing stop on position

Rationale:

SNP500 has been in a strong uptrend since October 2023. There was a pullback in mid April but that dip was bought and the SNP500 has rallied to new highs. Bond yields though have started to weigh in this bullish narrative and with high inflation prints seen in a number of developed economies, its hard to see the SNP being able to push onto new highs from these elevated levels. So looking to place a short on the SNP500 here using warrants. Position will hit stop loss if SNP500 does make new highs. Leverage is high on warrants (94%) so size risk accordingly. Target level on the trade is 5100 and even if SNP500 does fall to that level the current uptrend is still in tact. Technically the SNP500 has been short term negative and the MACD has just crossed over to the downside