Lufax Plunges 12.09%—Is This a Short-Squeeze or Sector-Driven Meltdown?

Summary
• Lufax (LU) trades at $2.945, down 12.09% from its $3.35 previous close
• Intraday range spans $3.29 high to $2.91 low, signaling sharp volatility
• RSI hits 83.33 (overbought), Bollinger Bands near lower bound at $2.48
• Sector peers like PayPal (PYPL) rally 0.33%, contrasting LU’s selloff

Lufax’s dramatic 14:28 ET drop has traders scrambling to identify catalysts. While the stock’s technicals scream overbought correction patterns, the divergence from a resilient financial sector—and a crowded options chain—suggest deeper forces at play. With turnover surging to 5.47 million shares, the question isn’t just about why LU fell—it’s whether this is a fleeting panic or a warning shot.

Technical Exhaustion and Sector Divergence Fuel Lufax's Sharp Drop
Lufax’s 12.09% intraday collapse aligns with classic overbought correction patterns. The RSI (83.33) and MACD histogram (0.0656) suggest exhausted bullish momentum, while Bollinger Bands ($3.15 upper, $2.48 lower) show the price near oversold territory. This technical dislocation follows no direct company-specific news—its latest filings focus on UK trade deals and auto-sector innovation. However, broader financial sector jitters, including Centene’s 10%+ earnings miss and NatWest’s buyback announcement, may have triggered defensive unwinding of leveraged positions in volatile names like LU.

Diversified Financials Rally While Lufax Falters
The U.S. Diversified Financial industry gained 1.2% in the last week, led by Berkshire Hathaway (+2.2%) and Visa (+1.2%). Conversely, Lufax’s 12.09% drop diverges sharply from this trend. Sector-wide optimism stems from rising interest rates and digital transformation gains, yet LU’s collapse hints at idiosyncratic risks—possibly tied to its -5.29 P/E ratio or regulatory scrutiny in its fintech operations. The lack of sector correlation underscores the need for granular analysis of LU’s exposure to China’s shadow banking reforms and U.S.-listed depositary structures.

Options Playbook: Leverage Volatility with High-Gamma Contracts
• 200-day MA: $2.77 (below) | RSI: 83.33 (overbought) | Bollinger Bands: $3.15 (upper), $2.48 (lower)
• Key support/resistance: 200D MA at $2.77, 30D support at $2.73

Lufax’s technicals suggest a short-term bounce from oversold levels but long-term bearish pressure. The options chain reveals two high-conviction plays:

• LU20250919P3 (Put Option)
- Strike: $3 | Expiry: 2025-09-19 | IV: 70.45% (High Volatility) | Delta: -0.465987 (Moderate Sensitivity) | Theta: -0.001514 (Slow Time Decay) | Gamma: 0.486480 (High Sensitivity to Price Movement) | Turnover: 5,223
• LU20250919C3 (Call Option)
- Strike: $3 | Expiry: 2025-09-19 | IV: 69.21% (High Volatility) | Delta: 0.532664 (Moderate Sensitivity) | Theta: -0.003782 (Moderate Time Decay) | Gamma: 0.495283 (High Sensitivity to Price Movement) | Turnover: 5,480
Aggressive bulls may scalp a bounce above $3.00 with LU20250919C3; bears should target $2.77 200D MA with LU20250919P3 as a short-term play.

Backtest Lufax Stock Performance
The backtest of the Long-U ETF (LU) after a -12% intraday plunge reveals a significant underperformance, with a strategy return of -87.91% and an excess return of -161.76% compared to the benchmark return of 73.85%. The strategy had a maximum drawdown of 0.00%, indicating that it did not experience any further declines after the initial plunge, but it also failed to capture any significant gains, resulting in a CAGR of -36.24% and a Sharpe ratio of -0.66.

Rebound or Reckoning? Watch $2.77 and September Options Expiry
Lufax’s 12.09% drop reflects a mix of overbought technical exhaustion and sector divergence, but its long-term bullish trend (52W high of $4.15) remains intact. The key 200D MA at $2.77 and September 19 options expiry (LU20250919) will determine whether this selloff is a correction or catalyst for deeper bearish momentum. Sector leader PayPal (PYPL) rises 0.33%, signaling broader financial resilience—contrasting LU’s struggles. Act now: Short sellers should target $2.77 support, while longs may test $3.00 reentry ahead of expiry. Volatility isn’t fading; it’s evolving.