This United Parcel Service (UPS) Trade Targets a 100% Return in Two Months

Stocks moved significantly higher on Friday with all four indices moving up. The Dow led the way with a gain of 1.74% and it was followed by the Russell with a gain of 1.56%. The S&P notched the third biggest jump at 1.09% and the Nasdaq lagged slightly with a gain of 0.61%.

All 10 of the main sectors moved higher on Friday, but there was a wide spread between the gains. The financial sector experienced the biggest gain at 2.13% and it was followed by the energy sector which tacked on 1.61%. In all there were five sectors that gained more than one percent.

[hana-code-insert name=’adsense-article’ /]The biggest laggard on the day was the utilities sector, but it gained 0.31%.

The communication services sector only gained 0.43% and that was the second smallest gain.

Even though the market moved higher on Friday, my scans produced more bearish signals on Friday than bullish ones.

There were 48 names on the bearish list and four on the bullish list.

The barometer fell from -0.4 to -19.2 once these results were added in to the calculation.

With the greater number of bearish stocks to choose from, the trade idea for today is a bearish one and it is on United Parcel Service (NYSE: UPS).

The company’s fundamentals aren’t terrible with an EPS rating of 82 and an SMR rating of a B. However, the earnings have only been growing by 9% per year over the last three years and sales have only been growing at a rate of 8% over the same time period.

We see on the chart that the stock reached a high around $123 back in September and then around $117.50 in December. If we connect those two highs we get a downward sloped trend line that is right around $112 currently. The stock seemed to top out a little last week and it did so below the $112.50 level. The stock is overbought based on the daily stochastic readings and the 10-day RSI.

Buy to open the April $115-strike puts on UPS at $6.10 or better. These options expire on April 18. The options will double if the stock drops to $102.80. The stock reached a low of $102.97 back in October, so it may have to break below that level for the options to double. I suggest a target gain of 100% with a stop at $112.50.

— 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.