Welcome back! We’re excited to close out the second week of our new-and-improved Trading Opportunities e-letter with you.
This week, we’re focusing on banks, tech, and travel in our Strategic Trader trading research service.
Check them out below –and click here to learn how to get access to the full details on these plays.
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Trading Opportunity No. 1: Banks
Earnings performance has been better than expected, and as long as it continues on the same path, we should maintain a bullish outlook.
Even the sectors that had been struggling (e.g., retail) are doing a bit better as investors look past the bad news to an easing of some of the supply-chain issues that may develop later this year and in early 2022.
However, we don’t think the volatility triggered by worries around inflation and interest rates is done. So, we need to improve the diversification in the recommended portfolio. One group that should perform well (or continue to perform well) in choppy market conditions like that is banking. We recommend taking advantage of that by reopening a bullish position in Stock A.
Stock A’s report was one of the first to kick off earnings season this quarter, and as long as consumer and business demand for credit remains high, it should do well. Additionally, if longer-term rates rise further, it should benefit its yield spread and set the company up for bigger profits in the short term.
Trading Opportunity No. 2: Big Tech
Earnings season has been eventful so far, and we don’t see the excitement easing up anytime soon. So, on Tuesday, we entered two trades: one pre-earnings trade and one post-earnings trade to take advantage of patterns we see developing.
The first trade, tech-centric Stock B, we entered is one that has rallied back up prior to the company’s earnings announcements.
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We don’t expect the stock to move much before earnings, but we wouldn’t be surprised to see it jump higher after earnings. The company is still facing supply-chain issues, but we don’t see them dampening demand for Stock B’s products at all — which spells a perfect opportunity for us!
Trading Opportunity No. 3: Travel
Also on Tuesday, we focused on travel with a play on Stock C.
Southwest Airlines (NYSE:LUV) released its latest financials last week and beat revenue estimates and earnings estimates significantly. However, even with these positive numbers — coupled with news of increased domestic airline bookings — Wall Street has been unwilling to push the stock back up higher this week.
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El Segundo, Calif.-based sporting goods retailer Big 5 Sporting Goods Corp. (NASDAQ:BGFV) has been one of the stocks to benefit from the COVID-19 pandemic. Consumer interest in outdoor activities and demand for sporting goods increased; however, unlike many other pandemic stocks, the shift back to “normal times” should not impact BGFV the same way it might affect Zoom Video Communications Inc. (NASDAQ:ZM).
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And as consumer spending rises, we like BGFV’s prospects, despite some of the short-term logistical problems that have impeded the company’s Chinese imports. Additionally, one of the most compelling aspects in favor of BGFV is the dividend yield at 4.16%, which is almost triple the average of the S&P 500. Investors are undervaluing the stock and the income right now as it competes with other highflyers.
Right now, BGFV is a good buy between $22 and $25.
Summing Up
Every week, we’re going to share with you some details on the plays we recommended in Strategic Trader, our trading research service.
To get the full details on our trades on stocks A, B, and C, join us here to learn how.
Now, you may have noticed that we mentioned options plays — and if you’re one of those folks who get skittish when the word is dropped, we understand.
We’ve heard it before. Trading options is “too risky,” “too confusing,” or “too difficult” for the average American.
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We’ll be back with you on Monday with more trading opportunities.
Sincerely,
John Jagerson and Wade Hansen
Editors, Trading Opportunities
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