Bullish – GM – $49.97
Equities ended the week on a bearish note with poor retail numbers indicating that the economy lost momentum at the end of 2020. Markets have already priced in optimism as banking stocks declined, despite posting strong earnings numbers. Additionally, a $1.9 trillion stimulus package proposed by the Biden administration fueled fear that it will result in increased taxes. The combination of negative news resulted in SPY breaking below its $377 intraday support and testing its 21D EMA. Cyclicals saw the deepest declines to end the week with Energy, Financials and Industrials being hit the hardest. We remain cautiously bullish on equities as this dip may open the doors for more long positions.
GM Trade Idea:
On Friday’s CNBC Options Action show, Tony Zhang suggested that GM’s rally is just getting started after breaking out to new all-time highs. A break above $46, coupled with strong relative strength signals an acceptance of GM as long term EV player. With partnerships secured across battery technology, autonomous driving and hydrogen fuel cells, GM has invested in technologies to propel their EV vision beyond 2025. Tony suggested earning GM exposure through a short put by selling the Feb $50 Put @ $2.92 Credit or 5.75% of the stock’s price.
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