Bullish – LUV – $46.90
Equities ended the week on a bullish note despite a negative start to the previous week. SPY and QQQ both welcomed new highs surpassing the $380 level and $318 level respectively. A poor jobs number was not enough to stem bullish momentum with stimulus optimism increasing under the new Democratic-led Congress. As mentioned last week, the key performers were the Financial and Industrial sectors. A sign of an early bull market has been the outperformance of small-caps of over 5% higher over large-caps. However, we remain cautious that equities could lose momentum and experience a short-term pullback for better bullish entries.
LUV Trade Idea:
With cyclical stocks starting to gain momentum, our bullish trade is Southwest Airlines (LUV). Ongoing economic reopening combined with LUV’s solid fundamentals provides a good long entry. Despite the airline industry being one of the worst impacted by the pandemic, LUV maintained a negative net debt position. LUV is best positioned for recovery with a strong brand image, operating efficiency, and a focus on domestic travel. With strong relative strength and earnings in 2 weeks, Tony Zhang, suggests buying a March $45/55 Call Vertical @ $3.55 Debit.
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