This Trade Targets a 100%-170% Return in 6 Weeks

All four of the main indices moved higher yesterday with the Russell leading the way with a gain of 0.97%. The Nasdaq (+0.65%) and the S&P (+0.64%) experienced similar gains while the Dow lagged the others with a gain of 0.45%. One of the things that helped lift stocks around the world was a rebound by the Turkish lira.

All ten sectors moved up on Tuesday. The consumer discretionary sector led the way with a gain of 0.97% and it was followed by the financial sector which gained 0.90%.

[hana-code-insert name=’adsense-article’ /]The two worst performing sectors were energy (+0.23%) and utilities (+0.25%).

For the first time in almost two weeks, my scans produced a solid bullish skew.

There were 34 names on the bullish list and 20 names on the bearish list last night.

The barometer moved from -26.9 to -9.0.

One name on the bullish list that jumped out at me was Nucor Corp. (NYSE: NUE).

The steel manufacturer has seen its earnings grow at an average rate of 41% over the last three years and by 107% last quarter.

Those numbers give the company an 87 on IBD’s EPS rating and the company gets a B in the SMR rating.

The stock has formed a trend channel over the last five months and the stock just hit the lower rail of the channel. We can also see that the stochastic readings hit oversold territory and have now made a bullish crossover. This has also happened at the other lows that helped form the channel.

Buy to open the Sep18 $62.50-strike calls on NUE at $2.60 or better. These options expire on September 21. The upper rail of the channel is up around $69.50 and that would make these options worth $7.00. That would give investors a gain of 170%. The timing on this trade idea is going to be critical as expiration could arrive before the stock reaches the upper rail, but the options will double if the stock reaches $67.70.

— 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.