We note the algo short signal that occurred Friday on Suncorp. The stock is making a lower low and lower high pattern and resistance is at or near $13.00.
Given the backdrop of equities looking extended, in particular the financials, we’re willing to look at SUN on the short side with stops above $13.00. Downside price target will not extend past $12.25 as the 6% yield remains well supported. This is a trade that will be driven by index selling rather than company specific weakness.
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For our portfolio clients holding SUN, we use this as an opportunity to enhance the yield and sell $13 calls into June 17 for a $0.50 credit, whilst keeping exposure to the $0.30 February dividend. This enhances the annualised cash flow to over 10%.
