This morning, I’m recommending a bullish call option on Knowles Corporation (NYSE:KN), the global audio processing component producer.

Last week, my indicators were giving buy signals, and I still think the market is set up to head higher this week.

The S&P 500 dropped slightly last Friday, but I still think the market could head higher. I talked about growing optimism about trade last week, and this week, we’re seeing that trend continue.

A Mix of Good and Bad News

Over the weekend, U.K. Prime Minister Boris Johnson had to present his Brexit deal to British Parliament. Parliament delayed voting on the deal, and instead sent Johnson back to the EU to ask for an extension. This isn’t necessarily good news, but it also isn’t bad.

Johnson could still get enough support, according to analysts at Deustche Bank, and the fact that the deal wasn’t rejected right away could mean the U.K. will get desperate enough to accept what many in its government considers a subpar deal.

In the U.S.-China trade war, the news is just as confusing. China is seeking sanctions against the U.S. because the U.S. failed to comply with a World Trade Organizations (WTO) ruling from the Obama era. This news seems like it would jeopardize the first phase of the trade deal between the two countries.

However, Chinese Vice Premier Liu He has publicly emphasized the fact that the countries are making progress. It’s also worth noting that the WTO sanctions are related to a much older dispute, which while a subtle distinction, may keep them from affecting the first phase of the trade deal too much.

KN provides electrical components to companies all over the world, including Amazon (NASDAQ:AMZN), who used KN components in its Echo Buds. Any boost to the global economy will help improve its outlook for the future.

Potential Support  at $21.50

Looking at KN’s chart, you can see it jumped higher last week, pushing above resistance at just under the $21.50 level. The stock pulled back slightly on Friday, but I think it will continue heading higher in the run up to its earnings report this week.

Daily Chart of Knowles Corporation (KN) — Chart Source: TradingView

Investors are very focused on earnings right now, which have been better than expected. If KN can post solid earnings and provide an improved outlook for 2020 thanks to trade optimism, the stock can continue climbing into December.

The stock may need to drop back to $21.50 to see if the old resistance level will serve as support going forward, but ultimately, I think its short term trend points upward.

Buy to open the Knowles Corporation (KN) Dec. 20th $22.50 Calls (KN191220C00022500) at $1.20 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.