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Last week was particularly volatile on Wall Street, but we went into the Memorial Day weekend with a little stability in the S&P 500. The index rebounded slightly from last Thursday’s pullback, and it appears it remained above key support at 2,816.94, which is great news.
Last week, amid the volatility, we noticed the relative strength of name-brand retail stocks. Though analysts are concerned about trade wars, tariffs and a potential slowdown of the global economy, it appears U.S. and global consumers are continuing to spend money on their favorite name brands.
Wall Street has taken notice, and traders are buying these stocks. We plan to take advantage of this trend by entering a new bullish put write on Coca-Cola (NYSE:KO).
Rolling Out a Profitable Position
We last recommended selling puts on KO over two weeks ago. President Donald Trump had tweeted about increasing tariffs on Chinese imports, and investors were worried about the state of the market. We thought “conservative bullish stocks” would rise as traders moved out of riskier positions, and it looks like we were right.
We kept an eye on KO last week. While the rest of the stock market was struggling, KO climbed up to new short-term highs. Our last trade on KO was the May 17th $48 put write, and we bought it back for a profit before expiration.
With traders growing increasingly nervous and cautious after last week’s increased volatility, KO will again benefit from investors’ move to defensive large-cap stocks.
Breaking Above Resistance at $49
In our last trade on KO, we mentioned that the stock was seeing some resistance at the $49 level, which served as the top of a longer-term consolidation range.
KO recently broke above that down-trending resistance level at $49. We believe this price level will serve as support for the stock in the near term, and we think $49 strike price might be good for our put write.
Daily Chart of Coca-Cola (KO) — Chart Source: TradingView
We wouldn’t be surprised if KO encounters a little resistance at $50, but ultimately, we are looking for the stock to climb back up to its November 2018 high just below $51.
To find out which KO puts 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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