This Lowes (LOW) Trade Targets a 100% Return in Seven Weeks

Stocks moved higher on Friday with all four indices gaining ground and they early indications for today are for another move higher after the government shutdown was ended on Friday. The Nasdaq led the way on Friday with a gain of 1.29% and the Russell was close behind with a gain of 1.26%. The S&P notched a gain of 0.85% and the Dow lagged the others but still gained 0.75%.

Eight of the 1o main sectors moved higher on Friday with the defensive sectors losing ground. The materials sector led the way with a gain of 1.9% and it was followed by the tech sector with a gain of 1.42%. The tech sector was hindered by Intel and still notched a huge gain. In all six sectors gained over one percent.

[hana-code-insert name=’adsense-article’ /]As I mentioned the defensive sectors were the two that lost ground on Friday.

Utilities dropped 1.37% and consumer staples fell 0.40%.

My scans continued to narrow the discrepancy between the two sides with 18 names on the bearish list and six names on the bullish list.

The differential of 12 is the smallest since the 12-day stretch of negative readings started.

The barometer moved up to -34.7 from -52.6 once these results were added in to the equation.

With the tone of the market remaining positive for now, today’s trade idea is a bullish one and it is on Lowes Companies (NYSE: LOW). The company scores an 81 on the EPS rating and a B on the SMR rating.

The thing that jumped out at me most on Lowes was how the stock had dipped slightly in the last few weeks, but then jumped higher on Friday to move back above its 50-day moving average. The stock made a similar move back in August and jumped sharply higher on earnings. The company is set to announce earnings again on February 27.

Buy to open the March $90-strike calls on LOW at $6.60 or better. These options expire on March 15. These options will double if the stock reaches $103.20. This would take the stock back up to the area where it gapped higher in August and gapped lower in October. I suggest a target gain of 100% with a stop at $90.50.

— 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.