This Trade Targets a 100% Return in Two Months

Friday was a triple witching Friday and that seemed to have a minimal impact on the market. Three of the four main indices moved lower on the day while the Dow managed to log a gain of 0.32%. The Nasdaq suffered the worst loss at 0.51% and it was followed closely by the Russell with a loss of 0.46%. The S&P suffered a minor loss at 0.04%.

The sectors were split on Friday with four moving lower and six moving higher. The energy sector was the top performer with a gain of 0.66% and the industrial sector was a close second with a gain of 0.65%.

[hana-code-insert name=’adsense-article’ /]The consumer discretionary sector was the worst performer with a loss of 0.43%.

The financial sector and the tech sector tied for the second worst performance with matching losses of 0.39%.

My scans shifted back to a bearish skew on Friday, but the difference between the two lists was minimal.

There were 25 names on the bearish list and 21 on the bullish list.

The barometer remained in positive territory with a reading of 7.4.

The stock that jumped out at me the most was McKesson (NYSE: MCK) and it was on the bearish list.

We played the stock before back in August. That trade idea didn’t hit its 100% target, but it did reach a gain of 75%. The company scores a 66 on IBD’s EPS rating system and it scores a C on the SMR rating system.

You can see on the chart that the stock has been trending lower since January and a trend channel has formed over the last six months. The stock is at the upper rail of the channel currently and both the stochastic readings and the 10-day RSI hit overbought territory last week.

Buy to open the November $140-strike puts on MCK at $8.00 or better. These options expire on November 16. These options will double if the stock reaches $124 and that is well above the recent low and well above the lower rail of the channel. I suggest a target gain of 100% and a stop at $137.

— 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.