This Abbott Labs (ABT) Trade Targets a 100% Return in Eight Weeks

Tuesday brought us a mix of results from the four main indicators with two experiencing significant gains, one barely changed, and one suffered a significant loss. The Dow led the way with a gain of 0.44% while the S&P gained 0.33%. The Nasdaq was up 0.85 points which amounts to a gain of 0.01%. The Russell dropped 0.87% on the day.

Seven of the 10 main sectors moved higher Tuesday with the healthcare sector leading the way with a gain of 1.04%. The other two defensive sectors, consumer staples (0.89%) and utilities (0.79%) were the second and third best performers.

[hana-code-insert name=’adsense-article’ /]Of the three sectors that lost ground, the materials sector suffered the worst loss at 1.22%.

Energy lost 0.28% and industrials lost 0.17%.

My scans remained bullishly skewed last night, but the differential between the two lists dropped significantly.

There were 25 names on the bullish list and three on the bearish side.

The barometer did drop slightly after last night’s results were added in to the equation.

The reading came in at 75.2, down from 88.6.

Today’s trade idea is a bullish one and it is on a stock I have recommended on two previous occasions. The stock is Abbott Laboratories (NYSE: ABT) and the company has good fundamental ratings. The EPS rating from Investor’s Business Daily is a 76 and the SMR rating is an A.

The chart shows how the stock has been trending higher and how it has just bounced off of the trendline connecting the lows from the last seven months. The two blue arrows show the two previous instances where I recommended calls and both of those trades were successful.

Buy to open the January $67.50-strike calls on ABT at $3.70 or better. These options expire on January 18. These options will double on an intrinsic basis if the stock reaches $74.90. That is slightly higher than the recent high of $73.85, so you will want to keep an eye on the stock at that level to see if it acts as resistance. I suggest a target gain of 100% with a stop at $68.00.

— 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.