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Picking up Income on Ball Corporation

John Jagerson and Wade Hansen

We accepted shares of Ball Corporation (NYSE:BLL) when our BLL September 20th $77.50 options expired in the money. Now that we own shares of BLL, we want to collect income on the stock with a covered call — just like our Starbucks (NASDAQ:SBUX) recommendation from Tuesday.

In fact, since the strength of the consumer is a major influence on BLL’s performance, this trade has more in common with the SBUX covered call than you might think.

BLL was caught up in a selloff among materials stocks. We think profit taking in the sector is what pushed BLL down to support at $71, and now that we own the stock, we’re going to collect while we wait for a recovery. After this week, that may take a little longer than we expected, but eventually BLL will rise.

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Consumer Confidence is Down

The Conference Board released its Consumer Confidence Index this week, and after a slight decline in August, there was a much larger drop in September. The reading of 125.1 is the largest fall in the last nine months.

As regular readers know, a big theme on Wall Street has been the strength of the consumer, so this poor reading showing falling confidence was somewhat surprising to everyone. Though, if you think about it, it’s not hard to see why consumers might be becoming more bearish. After all, they have had to deal with a trade war with China, escalating tensions in the Middle East and now, an official impeachment inquiry in Congress, right?

BLL makes aluminum packaging for beverages and aerosol products, so it isn’t hard to imagine this slump in consumer confidence pushing prices down, but will the consumer stay cautious? We don’t think so. We’re heading into the biggest shopping season of the year, and that’s bound to boost consumption, regardless of what distractions there are in the political world.

For now, we’ll collect income on BLL and wait for traders to re-enter the stock.

Between $71 and $75

As you can see in the chart below, BLL has established support at around $71 and resistance at around $75. We expect this resistance to hold in the short term as the market deals with the uncertainty mentioned above.

Daily Chart of Ball Corporation (BLL) — Chart Source: TradingView

Just like the SBUX covered call we recommended on Tuesday, we recommend selling calls with a strike price equal to our entry price — in this case $77.50 — on the stock. If the stock is called away, we will still have made a profit because of the income earned from the covered call.

If BLL doesn’t recover before expiration — or if it drops to support at $71 — we can buy back the calls, lock in a profit, and sell another covered call while we wait for BLL to climb.

To find out which BLL covered calls we’re selling—and to get access to our full portfolio of income-generating trades—sign up for a risk-free trial of Strategic Trader today.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.

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