Last Friday Wesfarmers announced plans to float the Coles Supermarket division into a new company on the market. This would be a Top 30 stocks on the market if it was to happen. The plan is for a float sometime in 2019 and the details are scant at the moment.
The chart below shows the market may have gotten ahead of itself in its reaction to the announcement. The stock peaked around $44.45 last Friday and with today’s fall, the stock is setting up an Island Reversal pattern.
To trade this pattern you could sell 500 WES CFD’s which would attract a 5% margin or around $1077. A stop-loss at $44.50 would be risking approximately $675, The target price for this short would be the close of trading on Thursday the 15th at around $41.25.
For those without a CFD account, a Put Option can be purchased over Wesfarmers.