This Boeing (BA) Trade Targets a 100% Return by Year-End

It was another brutal day for stocks on Wednesday with all four indices getting hit hard. The Nasdaq got hit the hardest with a loss of 4.43% and it was followed by the Russell with a loss of 3.52%. The S&P took a loss of 3.09% and the Dow had the smallest loss at 2.41%. The losses have all four indices below their 52-week moving averages for the first time since the first quarter of 2016.

Once again we saw eight of the ten main sectors fall and some of the losses were huge. The communications services sector experienced the worst loss at 4.7% and it was followed by the tech sector with a loss of 4.44%.

[hana-code-insert name=’adsense-article’ /]The energy sector (-3.88%), industrial sector (-3.39%), healthcare sector (-3.27%), and materials sector (-3.24%) all finished with losses greater than three percent.

The other two both finished with losses over 2.5%.

The utilities sector led the way with a gain of 2.39% and the consumer staples sector (+0.44) was the only other sector in positive territory.

Because so many stocks are in oversold territory on their daily charts, my scans produced more bullish signals than bearish signals even with the big selloff yesterday.

There were 35 names on the bullish list and 15 names on the bearish list.

The barometer rose slightly to 31.3 from 29.4 once yesterday’s results were added to the calculation.

It was hard to select a bullish trade after yesterday’s big selloff, but none of the stocks on the bearish list met my eye test. As a result, today’s trade idea is another bullish one and it is on Boeing (NYSE: BA). The company reported earnings yesterday morning and the company beat on the top and bottom line. The stock closed 1.3% higher on the day despite the selling. IBD gives Boeing a 92 on the EPS rating and a B on the SMR rating.

Boeing has been trending higher since April and there is a trend channel that has defined the up and down cycles. The stock just hit the lower rail of the channel and the stochastic readings just made a bullish crossover. I look for Boeing to move higher over the next few months, but it might need the market’s help to get back to the upper rail.

Buy to open the December $355-strike calls on BA at $18.00 or better. These options expire on December 21. The stock will have to get to $391 for these options to double on an intrinsic basis, but that is below the recent high and it will be well below the upper rail of the channel in a few weeks. I suggest a target gain of 100% with a stop loss at $348.

— 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.