When volatility and uncertainty creep into the market, some investors start frantically looking around for new investments. They bounce back and forth between the latest fad investments and end up churning their portfolios.
We’re different. We prefer to stick with the old classics that have been performing well because those are the same stocks that are likely to continue performing well. Why? Because they are the fundamentally sound investments that tend to do well during all market conditions.
That’s why we’re going back to one of our favorite stocks today with a new trade on The Coca-Cola Company (NYSE:KO). There’s no need to mess around with a “New Coke.” We like the profitable taste of the “classic” version just fine.
Bucking the Bearish Trend
Confusion about the trade situation is dragging on stocks, as we mentioned in our last recommendation.
Periods of market volatility are frustrating, and they can seem like they last a very long time. However, statistically speaking, downturns are shorter than bull trends, and we don’t see enough fundamental weakness to justify a negative outlook in September and October.
But there is some good news out there. The Conference Board released its measure of consumer attitudes towards the U.S. economy this week, and the indicator was at a new 19-year high. We’re expecting the Bureau of Economic Analysis (BEA)’s Personal Income and Outlays report to help confirm the strength of the American consumer.
One product consumers can’t get enough of is Coca-Cola, and KO’s performance proves it.
KO has been bucking the bearish trend on Wall Street all month. While the S&P 500 has fallen and consolidated at lower levels during August, KO has been pushing higher. The stock even hit a new 52-week high this week.
New Support at $53
Seeing this bullish momentum gives us a lot of confidence the stock is going to remain well above the support level at $53, which it established in late July and early August.
If you look at the chart below, you can see KO is still above the $53 level now.
Daily Chart of Coca-Cola Company (KO) — Chart Source: TradingView
The stock first jumped up above $53 after the company reported its quarterly earnings on July 23. KO beat revenue expectations by $138.61 million and earnings expectations by $0.02 per share last quarter, and we anticipate the company’s growth is continuing this quarter as consumer spending in the United States remains high. KO itself is expecting total sales growth of 12-13%.
All of this makes a put write an ideal strategy for this situation, and support at $53 gives us a good strike price to use.
To find out which KO covered calls we’re selling—and to get access to our full portfolio of income-generating trades—sign up for a risk-free trial of 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.