This Dominion Energy (D) Trade Targets a 100% Return in Five Weeks

Stocks moved higher on Monday to follow up the big gain on Friday. The main indices all gained ground, but the gains were much more modest. The Russell led the way with a gain of 1.78% and it was followed by the Nasdaq which logged a gain of 1.26%. The S&P notched a gain of 0.70% and the Dow lagged the others with a gain of 0.42%.

Eight of the 10 main sectors moved higher with the defensive sectors being the two that lost ground. The utilities sector lost 0.66% on the day and the consumer staples sector lost 0.18%.

[hana-code-insert name=’adsense-article’ /]The consumer discretionary sector had the biggest gain on the day at 2.27%.

The energy sector finished with the second best gain at 1.5% and communication services logged a gain of 1.14% and it was the only other sector with a gain of over 1%.

My scans moved back to a bullish skew on Monday with 44 names on the bullish list and nine names on the bearish side.

The barometer moved back in to positive territory with a reading of 11, up from -5.7, once these results were added to the equation.

There were two prominent themes on the bullish list, real estate oriented stocks and ETFs and utilities.

There were 15 real estate names on the list and eight utilities. One utility stock that caught my eye was Dominion Energy (NYSE: D). The company scores above average in the fundamental ratings with a 68 on the EPS rating and a B on the SMR rating from IBD.

The chart shows how Dominion has moved in cycles over the last four months and there is a channel that defines the cycles within the trend. The stock just hit the lower rail of the channel and the stochastic readings just made a bullish crossover. The last time this happened was at the beginning of November and the stock rallied 11.6% over the next month and a half.

Buy to open the February $70 strike calls on D at $3.20 or better. These options expire on February 15. These options will double if the stock hits $76.40 and would mean a gain of 6.56% from where the stock closed last night. That area is approximately where the upper rail of the channel should be in a few weeks, but below the recent high. I suggest a target gain of 100% with a stop at $70.20.

— 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.