At the end of last week, Wall Street had been treated to two pieces of good news. First, it got word that the United States and China — like an on-again-off-again junior high couple — have once again decided to resume trade talks.
Second, it heard from the Bureau of Labor Statistics (BLS) that the U.S. job market is strong.
According to the BLS, the U.S. economy created 130,000 new jobs during August, unemployment is still at the incredibly low level of 3.7% and wages grew by a strong 3.2%.
All of this good news has sent stocks — especially consumer stocks, like Target (NYSE:TGT) — higher, and we’re ready to take advantage of the bullish momentum with a new bullish trade on the name.
The Strong Consumer
In our recommendation on The Coca-Cola Company (NYSE:KO) from August, we mentioned the Conference Board’s measure of consumer attitude toward the U.S. economy, which was at a 19-year high. With this new data from the BLS, it’s easy to see why.
Strong jobs and wage-growth numbers tell us U.S. consumers have even more money in their pockets. That extra income translates into extra confidence and extra spending. As we head into the all-important holiday shopping season, consumer stocks like TGT will benefit, making them that much more attractive to investors.
Skyrocketing to Over $100
TGT skyrocketed higher last month after reporting stellar earnings. The company beat revenue expectations by $101.83 million and earnings expectations by $0.20 per share — coming in at $18.42 billion and $1.82 per share, respectively.
TGT credits its strong performance to stronger-than-expected comparable sales growth and online sales growth. In other words, consumers are spending more money at TGT, both in its stores and online.
You can see the stock’s incredible gap higher if you look at the chart below. It ran into some resistance at around $106.50 before dropping back to new support at just below $104. Now it has pushed all the way up to $110 and established support at that $106.50, its old resistance level.
Daily Chart of Target (TGT) — Chart Source: TradingView
This dramatic leap higher is all very new, but it is promising. We recommend trading selling a put write on TGT to take advantage of this bullish sentiment.
The $105 strike price runs right through the week-long consolidation range TGT went through after its post-earnings price jump. We expect this amazing uptrend on TGT to continue in the near term and for this consolidation range to serve as a strong support level.
To find out which TGT 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.