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We are recommending a bullish trade on Coca-Cola (NYSE:KO).
This weekend reminded Wall Street once again that no matter how well things seem to be going, President Trump can change everything with a single tweet.
Whether this tweet was simply a negotiating tactic or a viable threat, we don’t know. What we do know is traders reacted negatively to it because anything that could disrupt global economic growth is viewed as bearish for stocks. Not surprisingly, the S&P 500 dropped before the opening bell and has been bouncing back and forth today.
So what do traders do in situations like these? Do they start panicking and sell all of their bullish positions? No. They start shifting some of their assets into more conservative bullish positions like KO.
A Conservative Bullish Stock
KO is considered to be a conservative bullish stock because it’s a stable, large-cap company in the Consumer Staples sector. Consumer Staples stocks enjoy the reputation of being consistent revenue producers in both good and bad economic times because consumers will buy their products regardless of what is happening in the economy.
This is certainly true for KO. It doesn’t matter if we’re in an economic expansion or recession. Consumers are always getting their Coke fix.
Plus, with KO’s strong, consistent dividend payment and a raft of new products — from Coke Energy and Coke Coffee to Coca-Cola Orange Vanilla — the company is poised to continue growing and capturing market share.
Support at $48
If we turn to the daily chart, we see KO gapped up after its last earnings report — despite missing earnings per share (EPS) expectations. Now the stock has found support at around $47.50, and we think it will stay above $48 for the next week. That makes it a good level to sell puts at.
Daily Chart of Coca-Cola (KO) — Chart Source: TradingView
KO encountered some resistance at $49, but because we like the fundamental picture, we think a short-term, bullish put write is in order.
To find out which 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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