Morgan Stanley Stock Boasting Multiple Support Layers

December is the third most bullish month of the year for MS

Nov 29, 2022 at 11:43 AM

Bank stock Morgan Stanley (NYSE:MS) is forming a cup-and-handle pattern that is currently flagging. The shares are back above their 200-day moving average, with a confluence of rising moving averages below the support price.

There’s additional support at MS’ year-to-date anchored VWAP (volume-weighted average price) -- the first time there hasn’t been a failure at this level all year. December and January are the second and third most bullish months of the year, from a seasonality perspective, making now the time to strike with MS.

A further breakout could force money managers to buy shares of MS, and the 95- and 105-strikes could act as magnets.

Digging deeper, the stock's 50-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 1.13, and is rolling from near all-time high exposure levels. In other words, this suggests a healthier-than-normal appetite for long puts of late.

Now looks like an ideal time to speculate on the stock's next moves with options, given its Schaeffer's Volatility Index (SVI) of 26% stands in the low 10th percentile of readings from the past year. This means options traOders are pricing in low volatility expectations for MS right now.

Our recommended February call has a leverage ratio of 8.2, and will double in value on a 12.3% pop in the underlying shares.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this MS commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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