This Trade Targets a Potential 100% Return by February 19

Option Trade Of The Day: Santander Consumer USA Holdings Inc

Santander Consumer USA Holdings is specialty consumer finance company that provides vehicle financing via installment loans as well as leases and dealer loans for inventory. The company is headquartered in Dallas, Texas and was founded in 1995. .

[hana-code-insert name=’adsense-article’ /]The chart for SC shows how the stock has been riding its 50-day moving average higher over the past seven months.

Each time the stock has gotten near the trendline it has bounced higher over the following month or so.

We see that the stock got close to the 50-day on Friday before it reversed.

We also see that the stochastic readings made a bullish crossover on Friday and even when they weren’t in oversold territory, these crossovers have been good signs for the stock.

There is another aspect of the action on Friday that suggests a move higher is in order in the coming days and that is how the candlestick has a long tail to it. The stock opened higher on Friday, dipped significantly lower after the open, and then rallied sharply to close above the original opening price. This pattern shows a shift in the momentum during the day and is considered a bullish sign.

Buy to open the Feb18 18 strike calls on SC at $1.20 or better. These options will expire on February 16. This is an aggressive trade due to how little intrinsic value there is in the options and the fact that they are front-month option. The previous bounces from brushes with the 50-day created anywhere from 13% to 18% gains over the following weeks. For this option to double we will need a bounce of at least 14%, but that seems reasonable. I would target a gain of 100% and would set a stop at the low from Friday of $17.88.

— 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.