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This morning I am recommending a bullish trade on Zoetis (NYSE:ZTS), a $44.5 billion company that discovers, develops, manufactures, and sells animal health medicines and vaccines.
My indicators are giving buy signals for the first time since the end of August, as the major indices rebounded from their oversold conditions last week. However, it’s possible that the rally was just a “dead-cat bounce,” so caution is still warranted.
Historically, stocks tend to make bottoms near the end of October and then head higher into November and December. We are also still in the first few trading days of a new month, which tend to have a bullish bias, as this is when fund managers usually allocate new capital to the markets.
Furthermore, I think most of the tax-loss selling by institutions that takes place near the end of October is probably behind us at this point.
Earnings have also been supportive of this week’s rally. Approximately 75% of S&P 500 companies that have reported earnings so far this quarter have exceeded expectations, which is a positive sign.
ZTS jumped to a record high last Thursday after it announced earnings of $0.83 per share and $1.48 billion in sales, both of which beat expectations. However, the stock dropped back down a bit during Friday’s selloff and has provided traders with another great entry point for a bullish trade.
I believe ZTS will continue to be a leader and trade higher along with the broader market through the end of the year, and I’m looking to play the move with call options.
Buy to open the Zoetis Inc. (ZTS) Jan (2019) 100 Calls (ZTS190118C00100000) at $1.45 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.