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We have been managing a position in Emerson Electric Co. (NYSE:EMR) since October. Right now, we are holding shares of EMR and selling covered calls in order to earn extra income.
The company is a fundamentally strong, internationally diverse manufacturer known for industrial electrical and HVAC equipment and its automation hardware for several industries, including oil and gas.
It also manufactures multiple brands of household appliances and tools. If you have ever bought a power tool at Home Depot (NYSE:HD), there is a good chance you have personally interacted with EMR through their Ridgid Tool brand.
Many industrials sold off on negative trade headlines as investors lost confidence in a short-term improvement to the trade disputes between the U.S. and China. These concerns pushed EMR below support and back into its price range from last year.
The probability for some improvement in the short term remains high, so we think the risk/reward of holding the stock is still justified.
Daily Chart of Emerson Electric (EMR) — Chart Source: TradingView
From a technical perspective, the stock dropped below its well established support at the $66 level. That former support may act as resistance, and we expect the stock to stay around the $64 range before a stronger rebound occurs.
Therefore, we plan to collect some extra premium by selling covered calls closer to the current resistance level.
To find out which covered calls we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today.
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 Strategic Trader.
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