Profit With a Call Option as Campbell Soup Company Pushes Higher

It's been rising all through 2019

This morning, I’m recommending a bullish call option on Campbell Soup Company (NYSE:CPB).

My indicators are giving moderate buy signals this week, a significant upgrade from last week’s sell signals.

Since then, the S&P 500 index has recovered above its 50-day moving average (red line) and is now pushing the 3,000 level again.

Daily Chart of S&P 500 Index (SPX) — Chart Source: TradingView

As many of you know, moving averages can be long term or short term in nature. Traders typically look at 50-day and 200-day moving averages for clues about market direction, as they help to smooth out the day-to-day volatility in the market.

With that in mind, it’s worth noting that the 50-day moving average is now curling higher after sloping lower during the first week of October. The 200-day (blue line) is also moving higher, which tells me that both the short-term and long-term trends are bullish.

CPB makes a good candidate for a bullish play because of its strong technical picture and resilience to the effects of aluminum tariffs.

Global Optimism

The S&P 500 gapped higher at last Friday’s open in anticipation of a U.S.-China trade deal, and it’s up another 1% since phase one was announced on Friday afternoon.

Nothing has been signed between the two countries. But China agreed to increase purchases of U.S. agricultural goods, while the U.S. agreed to delay a tariff hike scheduled for this week.

There are still looming trade issues — like the aluminum and steel tariffs the U.S. has placed on European imports — but CPB seems largely unaffected by those concerns, despite needing those packaging materials for its goods. As a consumer staple stock in a time where the consumer is strong, it seems set up for success.

Pushing Higher and Higher

Looking at the chart below, you can see just how strong CPB’s performance has been over 2019. The aluminum and steel tariffs mentioned above haven’t diminished its ability to push higher.

Daily Chart of Campbell Soup Company (CPB) — Chart Source: TradingView

After reporting a small earnings beat at the end of August, the stock gapped higher. Since then it has steadily pushed toward very old resistance at $48. From there, the next resistance level CPB has to overcome is at $50.

Consumer staples stocks like CPB are appealing right now because they offer consistent dividends, solid performance, and the consumer is strong. CPB doesn’t have to move far to break above an old resistance level, and I think it’s inevitable as we enter what has historically been a strong period for the U.S. markets.

Buy to open the Campbell Soup Company (CPB) Jan. 17th (2020) $50 Calls (CPB200117C00050000) at $1.40 or lower.

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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.


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