We’ve opened a new bullish trade on General Electric (GE). Investors are in an interesting predicament. Most still want to have exposure to the U.S. stock market, but they are concerned about the unknown. What will happen when the Fed raises interest rates? Is the U.S. economy strong enough? Will a rising U.S. dollar (USD) derail emerging-market growth? Can China get back on track?
Because of these concerns, most investors seem to be favoring large-cap stocks that have healthy balance sheets, pay a strong dividend and provide plenty of liquidity. In other words, stocks exactly like General Electric.
General Electric is a mega-cap stock that has been shoring up its balance sheet — and protecting itself from potential oversight from the Fed and others — by divesting its financing operations (along with other less-profitable business units). You can see just how excited investors have been by this news, along with the company’s $50 billion share-buyback program, by looking at the strong jump in the stock’s price on April 10 following the announcement that General Electric was going to sell GE Capital. GE is also attractive because it pays a consistent, strong dividend and has plenty of liquidity.
Following General Electric’s most recent earnings announcement on Oct. 16, the stock shot through its up-trending resistance level and is now climbing even higher. We anticipate that this bullish trend will continue through November.
‘Buy to open’ the General Electric December 31 Calls (GE151218C00031000) for a maximum price of $0.53.
Also, we’re also closing our bullish trade on Tiffany & Co. (TIF). Unfortunately, very weak data from China have helped contribute to lower demand expectations outside the U.S. and likely slowing of tourism to the U.S. Visits to TIF’s stores by tourists in New York are a major source of revenue and margin for TIF, and that is looking more and more like a shrinking opportunity as the dollar remains very strong ahead of the Fed announcement in December.
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InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news.
