Hey There Income Hunters,
The reopening trade is running hot.
As you can see from the sector tracker below, consumer discretionary stocks led the way last week …
We should see stronger economic data this week, as well, so I favor a continuation of reopening trade flows.
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But first …
The Fed meeting this week will blast off another round of trading opportunities that could translate into more serious profits.
And that’s on top of the 60% average gains I’ve logged on my last 14 trades!
Join me, Mark Sebastian and Option Pit DC/Wall Street Insider Frank Gregory live at 4 p.m. EST on Wednesday for a closed-door strategy session — and get a month of full access to Mark’s Big Money program, to boot.
Secure your seat now!
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Today we’ll take a look at recent consumer spending data and I’ll give you a low risk/high reward trade to consider for this week …
Consumers Are Spending
First let’s take a look at the recent data on consumers …
Consumer confidence also increased in October, with the index rising from to 113.8, up from 109.8 in September.
The Present Situation assessment of current business and labor market conditions rose to 147.4 from 144.3 last month.
Consumer Expectations for income, business, and labor market conditions, meanwhile, improved to 91.3 from 86.7.
When Fundamentals Meet Technicals
Mastercard Inc. (Ticker: MA)
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- MA fell last week after strong Q3 results, tumbling 17% from its 52-week peak.
- It’s total volume reached more than 30% above 2019.
- Revenues reached 11.6% above 2019, without a complete reopening recovery and Q4 outlook was strong.
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Fundamentals are strong. Notice the increase in switched volume and cross-border volume in October over Q3.
The data should improve as the reopening trade picks up steam in November.
The shares are trading just under the fair value price, but the price-to-earnings ratio is below 2019, even though revenue and earnings are higher … so the stock has room to run.
Let’s take a look at the technicals:
I like the capitulation trade lower last week. After two days of selling on very high volume, MA rejected lower prices on Friday and closed high on good volume.
More importantly MA completed a positive relative strength index/price divergence. On Thursday, MA RSI made a lower low but price made a higher low. That is a good indicator of possible reversal in trend.
Trade for MA
I think the lowest risk/highest reward trade for MA with a high probability of success is to purchase the Nov. 19 340/345 call spread for $2 or lower.
Below is the risk profile showing your max gross profits and maximum costs..
The beauty of the MA call spread in this location is you can stop yourself out on a close below 328, which is the Oct. 28 low for the underlying stock.
This reduces your capital at risk so you can take less of a loss (if needed) and move on to the next trade …
Bring It Home
This is a big week with the Fed FOMC meeting on Wednesday.
Join me today at 11 a.m. EST today for Macro Monday. Today we’ll take a look at the probability of the Fed going ahead with QE tapering and what its impact on the market will be.
We also take a look at upcoming inflation numbers and supply next week.
Until then …
Live and Trade With passion My Friends,
Griff
