Note: U.S. markets will be closed all day this coming Monday, Sept. 2, for Labor Day.
This morning, I am recommending a bullish trade on Evoqua Water Technologies Corp. (NYSE:AQUA), the water treatment company.
Though my indicators are giving neutral readings this week, a mild downgrade from last week’s bullish readings, I’m still leaning towards the bullish camp.
We are entering a new month, which means that the market should have a bullish bias as fund managers put new capital to work. In bull markets, stocks tend to rise about 70% of the time at the start of a new month. The holiday on Monday should help with this as well.
The big risk on the market is the U.S.-China trade war, so we need to be selective about which stocks we use for bullish plays.
Exposure to China
It was reported yesterday that more Chinese troops arrived in Hong Kong this week amid the country’s protests. Despite reports that China may ease up a bit on trade, the situation in Hong Kong has the potential to derail the entire process.
A few weeks ago, President Trump specifically cited the situation in Hong Kong as a potential breaking point, saying “I’d like to see that worked out in a humanitarian fashion.”
AQUA does have exposure to China, but its chart shows it’s been performing relatively well in the past week, despite all the complications.
Resilient Despite Bad News
If you look at the chart below, you can see that AQUA has slowly been recovering since lat 2018, when it bottomed along with the rest of the market. Looking at its performance since mid-June, you’ll notice it has stayed above both its 50- and 200 day moving averages (MAs).
Daily Chart of Evoqua Water Technologies Corp. (AQUA) — Chart Source: TradingView
AQUA did drop below its 50-day MA in late July and early August, but it quickly bounced back above that level. It looks like it will continue trending higher, and because it has been so resilient to trade concerns, I think it is an excellent target for a bullish call option.
Buy to open the Evoqua Water Technologies Corp. (AQUA) Oct. 18th $15 Calls (AQUA191018C00015000) at $1.00 or lower.
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