This Trade Targets a 100%-Plus Return by May

Option Trade of the Day: Teck Resources Ltd. (TECK)

The fact that my scans produced more bearish signals than bullish signals on Friday proved to be a pretty good indicator for a down day after the S&P had moved higher for six straight days.

Last night, the scans once again produced more bearish signals than bullish signals and that sent my barometer in to negative territory for the first time since January 31.

There were only three bullish signals last night, so it shouldn’t come as a surprise that today’s trade idea is a bearish one.

Teck Resources (NYSE: TECK) was one of 36 stocks on the bearish list.

The company hasn’t performed well of late and saw its EPS drop by 25% in the most recent quarter with the annual EPS expected to decline by 19% in the current year.

The stock has seen the $30.80 act as resistance in the last couple of months and was turned away at that price again last week. There is some support at the $25 and I kept this in mind with the option I selected. I look for these two points to potentially act as a trading range over the next few months. The bearish crossover from the daily stochastic readings was an additional consideration for this trade.

Buy to open the April18 30 strike puts on TECK at $2.40 or better. These options expire on April 20. A dip down to the $25 level would make this option worth $5.00 and that would give investors a little more than a double on the trade.

— Rick Pendergraft

OPTIONS DISCLAIMER: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation,

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Rick Pendergraft, Trades Of The Day

Rick Pendergraft has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick's analysis process includes fundamental, sentiment and technical analysis.