This Altria (MO) Trade Targets a 100% Return in 6 Weeks

After the big gains on Tuesday, all four indices lost ground on Wednesday, but the losses varied greatly. The Russell lost the most ground at 0.41% and the Dow was the second worst performer with a loss of 0.36%. The S&P lost 0.03% and that was the best performance of the bunch. The Nasdaq was close behind with a loss of 0.04%.

The sectors were split yesterday with four moving higher and six moving lower. The best performer was the financial sector with a gain of 0.93% and the healthcare sector notched a gain of 0.54% for the second best performance.

The consumer discretionary sector logged the worst loss at 0.82% while the industrial sector lost 0.70%.

My scans were far more balanced last night than they have been in the last three days.

There were 14 names on the bullish list and nine on the bearish list.

One side note worth mentioning is that eight of the nine names on the bearish list were gold stocks or ETFs.

The barometer dropped from 147.8 to 100.8, but that is still a very high reading.

For today’s trade idea we are going back to a stock that we played back in early September. I suggested calls on Altria (NYSE: MO) when the stock had hit the lower rail of an upward sloped channel. The company’s fundamentals are above average with an EPS rating of 83 and an SMR rating of a B.

We see that the stock has hit the lower rail of the channel once again and it still has that second layer of support from its 50-day moving average. The oscillators aren’t as low as they were in September, but the stochastic readings just made another bullish crossover.

Buy to open the November Week 5 $59.50-strike calls on MO at $2.85 or better. These options expire on November 30. The stock needs to reach $65.20 for these options to double. The upper rail of the channel is at $65 and climbing so I think he can reach that level in the next 45 days. I suggest a target profit of 100% with a stop loss at $59.75.

— Rick Pendergraft

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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.