Buying Pressure Pushes HSBC Higher

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February 3rd, 2022 Buying Pressure Pushes HSBC Higher Dear Reader, Yesterday, we looked at a Monthly Price Chart of AmerisourceBergen Corp., noting the stock’s 1-Month Price is trading above the 10-month SMA signaling a ‘Buy’. For today’s Trade of the Day we will be looking at an On Balance Volume chart for HSBC Holdings PLC stock symbol: HSBC. Before breaking down HSBC’s OBV chart let’s first review which products and services are offered by the company. HSBC Holdings plc provides banking and financial services worldwide. The company operates through Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets segments. The Wealth and Personal Banking segment offers retail banking products and services, including current and savings accounts, mortgages and personal loans, credit and debit cards, and local and international payment services for ultra high net worth individuals; and wealth management services comprising insurance and investment products, global asset management services, investment management, and private wealth solutions. Confirming a Price Uptrend with OBV The HSBC daily price chart below shows that HSBC is in a price uptrend as the current price is above the price HSBC traded at six months ago (circled). The On Balance Volume chart is below the daily chart. On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line. On Balance Volume Indicator ● When Close is Up, Volume is Added ● When Close is Down, Volume is Subtracted ● A Cumulative Total of Additions and Subtractions form the OBV Line Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend.  We can see from the OBV chart below that the On Balance Volume line for HSBC is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability. The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price up trend. Confirmed ‘Buy’ Signal for HSBC Since HSBC's OBV line is sloping up, the most likely future price movement for HSBC is up, making HSBC a good candidate for a stock purchase or a call option purchase. Let's use the Hughes Optioneering calculator to look at the potential returns for an HSBC call option purchase. The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat HSBC price to a 12.5% increase. The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following HSBC option example, we used the 1% Rule to select the HSBC option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation. Trade with Higher Accuracy When you use the 1% Rule to select an HSBC in-the-money option strike price, HSBC stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if HSBC stock is flat at 37.23 at option expiration, it will only result in a 3.4% loss for the HSBC option compared to a 100% loss for an at-the-money or out-of-the-money call option. Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options. The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks. The prices and returns represented below were calculated based on the current stock and option pricing for HSBC on 2/2/2022 before commissions. When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price. For this specific call option, the calculator analysis below reveals if HSBC stock increases 5.0% at option expiration to 39.09 (circled), the call option would make 39.1% before commission. If HSBC stock increases 10.0% at option expiration to 40.95 (circled), the call option would make 81.6% before commission and outperform the stock return more than 8 to 1. The leverage provided by call options allows you to maximize potential returns on bullish stocks. The Hughes Optioneering Team is here to help you identify winning trades just like this one. Interested in accessing the Optioneering Calculators? Join one of Chuck's Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade. Become a Member Today! Do you want to start receiving hand-picked trades from 10-Time Trading Champion, Chuck Hughes? As a Trade of the Day subscriber, Chuck is offering you a special discount on his Weekly Option Alert Trading Service. Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join and use the code "Optioneering VIP" to receive special pricing!   Wishing You the Best in Investing Success, Chuck Hughes Editor, Trade of the Day Have any questions? Email us at dailytrade@chuckstod.com   If you didn't create an account using this email address, please ignore this email or unsubscribe. 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The actual profit results presented here may vary with the actual profit results presented in other Legacy Publishing LLC publications due to the different strategies and time frames presented in other publications. Trading on margin carries a high level of risk and may not be suitable for all investors. Other than the refund policy detailed elsewhere, Legacy does not make any guarantee or other promise as to any results that may be obtained from using the Services. Legacy disclaims any and all liability for any investment or trading loss sustained by a subscriber. You should trade or invest only 'risk capital' - money you can afford to lose. Trading stocks and stock options involves high risk and you can lose the entire principal amount invested or more. There is no guarantee that systems, indicators, or trading signals will result in profits or that they will not produce losses. Some profit examples are based on hypothetical or simulated trading. 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