Slack Technologies Climbing to its Highs

My indicators are back to giving bullish readings again, although I’m still fairly skeptical of the market’s rise. I think there’s still a lot of bad news left to cross the tape, including more bankruptcies, more virus cases and perhaps secondary shutdowns, that is not currently priced into the market.

With the risk of COVID-19 hanging over them, I think many people are going to continue working from home as long as possible. And to avoid going against the action in the market, I’m recommending a bullish call option on Slack Technologies, Inc. (NYSE:WORK).

WORK’s Product is Becoming More Important

Some states that have started to reopen are showing big jumps in the number of people who have the coronavirus. And some governors are showing that they’re willing to enforce another round of shutdowns if the health situation worsens.

If that becomes the case and the country goes into lockdown again, the market would not take that well at all. And for the companies that are already at risk, like those in energy and travel/transportation, I would expect a wave of bankruptcies to sweep through those sectors. They simply cannot handle another extended period of time with no income.

But some companies have thrived in this environment.

WORK and Zoom Video Communications, Inc. (NASDAQ:ZM) have become household names since the start of the pandemic because more and more people had to work from home. And though the economy is reopening, many people have discovered that more work can be done away from the office than previously thought.

Large companies like Twitter, Inc. (NYSE:TWTR), Square, Inc. (NYSE:SQ) and Facebook, Inc. (NASDAQ:FB) have all started allowing more employees to work from home on a more permanent basis, and I imagine smaller companies are considering doing the same thing. The tools made by ZM and WORK are going to be important even after the pandemic ends.

WORK stands to gain with or without more lockdowns.

WORK Could Climb to Recent Highs

If you look at the chart below, you can see that WORK gapped lower just over two weeks ago. That was because its earnings report wasn’t as good as investors hoped, but it also wasn’t bad.

Daily Chart of Slack Technologies, Inc. (WORK) — Chart Source: TradingView

And a closer look at the chart shows the stock is moving to fill that gap now.

One might ask why I went with WORK over ZM, and the answer is simple: headline risk. ZM is dealing with myriad security issues and its responses haven’t inspired confidence.

WORK has ground to make up after its big drop, and I think this market environment will lead it higher. With recent highs just above $39, I’m setting a strike price for this bullish trade at $40.

Buy to open the Slack Technologies, Inc. (WORK) Aug. 21st $40 Calls (WORK200821C00040000) at $2.00 or lower.

InvestorPlace advisor Ken Trester also 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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