This Trade Could Double Your Money in Two Months

Stock indices moved higher again on Thursday, making it five straight days of gains. It was a little more interest as stocks had to rally from early losses in order to notch the gains that the indices did.

The gains were pretty tightly grouped for the four main indices, but the Dow led the way with a gain of 0.51%, The Russell was next with a 0.46% gain followed by the S&P which logged a gain of 0.45%. The Nasdaq lagged ever so slightly with a gain of 0.42%.

Nine of the 10 sectors moved higher with the industrial sector leading the way with a gain of 1.36%.

The utilities sector was the second best performer with a gain of 1.31% and those were the only two sectors that logged gains over 1%.

The only sector that lost ground yesterday was the consumer discretionary sector with a loss of 0.29%.

My scans turned considerably more negative last night with 80 names on the bearish list and only one on the bullish list.

The barometer dropped from 5.0 to -30.2 as a result of this outcome.

One of the things that got stocks off to a bad start on Thursday morning were some disappointing retail results from different companies. One of the names on the bearish list last night was the SPDR S&P Retail ETF (NYSE: XRT). There were also 13 other names on the bearish list that were retailers.

Looking at the daily chart of the XRT you see that the stock hit its 50-day moving average on Wednesday and then gapped lower on Thursday. The moving average also halted a rally in the fund back in early November. We also see that the stochastic readings reached an overbought reading and made a bearish crossover back in November—just like it did yesterday.

Buy to open the March $45-strike puts on XRT at $2.70 or better. These options expire on March 15. These options will double if the stock drops to $39.60 and that means the stock won’t have to drop to a new low in order for the options to double. I suggest a target gain of 100% with a stop at $45.25.

— 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.