DBS - new put warrant available as stock nears overbought territory
💫Since last week's earning announcement that exceeded analysts' estimates, $DBS(D05.SI)$ has gained another 4.7% to a new record high of $76.99 on Tues, taking its year to date increase to 35.7%
🤖While its current price of $76.50 is trading above all 50-day, 100-day and 200-day moving averages, Bloomberg AskB points out some indicators that suggest DBS shares may show early signs of cooling
Its Relative Strength Index (RSI) for example, currently stands at 68.8 - approaching but has not breached the 70 overbought threshold, meaning momentum is strong but warrants monitoring for a potential pullback or consolidation
Its MACD shows a slight bearish crossover (MACD line just below signal), suggesting near-term momentum may be softening after a strong run
AskB states the key support levels to watch at the 20-day MA at $74.24 and the 50-day MA at $69.4
✴Cautious investors who are worried about DBS shares pulling back in the near-term can consider using Macquarie's newly listed put warrant $DBS MB ePW270225(YAZW.SI)$ (https://warrants.com.sg/tools/livematrix/YAZW)
👀Warrant investors can use the Exposure Simulator (https://warrants.com.sg/tools/exposuresimulator/YAZW) to simulate the performance of the put warrant alongside DBS shares
For example, based on the Exposure Simulator, a DBS shareholder with 2,500 shares worth $188,750 (based on DBS' share price level of $75.50 as of 917AM), will need only to invest $29,492 in 237,800 units of YAZW to hedge their shareholding
In this example, should DBS fall 8.1% to $69.40 in 24 days, YAZW will gain $15,460 to hedge the shareholder's shareholding loss of $15,250
Holding onto the warrant beyond 24 days will lead to a smaller absolute warrant price return that will not be sufficient to fully cover the shareholders' loss, but will continue to generate geared returns
⚠The maximum holding period of YAZW based on the forecasted fall of DBS shares to $69.40 in this case will be 116 days, where the warrant will no longer generate geared returns
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