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My indicators are giving neutral to slightly bearish readings this week, a mild downgrade from the neutral to bullish readings that were generated last week. From a technical perspective, it looks like the S&P 500 is starting to break out of its consolidation range, as the index was able to close above resistance at the 2,800 level yesterday.
The Nasdaq also set a new all-time high earlier this week, and the Russell 2000 small-cap index is getting ready to challenge its all-time high as well. So while technology stocks continue to lead the market higher, the problem is that much of the rest of the market is not participating.
Ultimately, I’m expecting corrective action that brings the market back to reality. There are still a lot of potential risks from the escalating trade war and, while I believe the United States will come out on top, trade issues could cause some short-term pain for stocks.
In the end, I would think the Trump administration would want to come to some sort of agreement on trade, particularly with Mexico, China and the European Union, before the mid-term elections in order to calm the markets and bolster his party’s chances, but it remains a risk factor until that happens.
This environment had me looking at the industrials for today’s play. Briggs & Stratton Corporation (NYSE:BGG), headquartered in Wisconsin, manufactures gas engines primarily for lawn and garden equipment. It exports to Canada, Europe, Asia and Australia in addition to its U.S. network.
Buy to open the BGG Oct 15 Puts (BGG181019P00015000) at $0.45 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.