A continued turnaround for Nokia Oyj (ADR) (NYSE:NOK) off the chart has led to some nice up, up and away price confirmation in NOK shares. Now however, a situation of up, up and ‘in-the-way’ points to an opportune time to make the split from a married put and partner afresh with less risk. Let me explain.
Just under a month ago I wrote a bullish follow-up piece on NOK stock using a married put strategy. The article was in front of an earnings report and embraced what I labeled as Nokia 2.0 as the Finnish telecom giant smartly reclaims some of its storied mobile business and moves into a strategic position for the inevitable transition towards 5G networks.
In the interim and as InvestorPlace’s Chris Lau wrote shortly after Nokia’s Q1 earnings release, it appears the company’s revival is on track after revealing modestly mixed results but circumventing seasonal weakness and demonstrating that its cost-cutting initiatives are working.
The confirmation is nice to see, as have been investors’ post-earnings reaction. Shares of NOK are up nearly 16% the last couple weeks and 19% since our analysis. As addressed prior though, there’s still a lot of work to be done — and now some of those challenges have come into play on the Nokia price chart.
NOK Stock Weekly Chart
Since our last look at NOK stock just under a month ago and as indicated in the yellow highlight on the provided weekly price chart — it has been good times. Now though and following the confirmation of our bullish forecast, things aren’t looking so bright.
The weekly view reveals Nokia shares are now facing multiple resistance lines from the 200-week simple moving average, key 50% and 62% retracement levels, a significant bearish gap and downtrend line dating back to NOK’s 2014 high.
This resistance zone spans from roughly $6.25 to $7 and looks formidable to say the least. Or stated another way, the resistance area appears to be definitely in-the-way and a challenge for bulls right now. As such and with bullish price action also pushing NOK above its Bollinger Band and a potentially bearish stochastics crossover in-the-making; profit-taking appears likely in the near-term.
Nokia Married Put
Longer-term, I like the prospects for NOK stock. But as emphasized above, investors are late to the party in the near-term. Given the described resistance, I’m anticipating a period of mostly lateral consolidation to perhaps a modest correction of 10% to 15% before Nokia can rally further.
In reviewing the Nokia stock options board, the bad news is Nokia’s status as a single-digit stock coupled with fairly low implied volatility translates into slim pickings as far as spreads go. And given our expressed view, but also not looking to short NOK in the near-term, I believe potential investors will have stronger opportunities to initiate a long position in Nokia shares in the weeks to come.
For those already in the name, the July $6 or maybe October $6 put make for an opportune hedge to protect an existing holding in NOK stock.
Similarly, with our previously discussed married put, a very nice profitable roll makes sense. Then and in a couple weeks or so, traders looking at the long game in NOK might do well to revisit this strategy to better manage their portfolio risk.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
