This Bullish Trade Targets a 100% Return in Seven Weeks

The indices were split yesterday with two moving up and two moving lower. The Russell led the way with a gain of 0.17% while the Dow was the worst performer with a loss of 0.28%. The Nasdaq gained 0.07% to join the Russell in positive territory while the S&P lost 0.05% to join the Dow in negative territory.

The sectors were mixed again with four moving higher and six moving lower. The communication services sector was the worst performer with a loss of 0.5% and it was followed by the healthcare sector with a loss of 0.47%.

[hana-code-insert name=’adsense-article’ /]There was a tie between financials and industrials for the best performance on Wednesday with each sector notching a gain of 0.38%.

The energy sector gained 0.37% and the utilities sector gained 0.16% as the other two in positive territory.

My scans produced a tenth straight night of bearishly skewed results on Wednesday with 27 names on the bearish side and 13 on the bullish side.

The barometer continues to inch back up as the difference between the two lists has grown smaller.

Last night’s reading moved up to -29.5 from -49.8.

Today’s trade idea is another bullish one and it is on Owens Corning (NYSE: OC). The building materials company scores a 91 on Investor’s Business Daily’s EPS rating system and it scores a B on the SMR rating system.

The thing that got my attention more than anything about Owens Corning was how the stock was finally able to move well above its 50-day moving average in the middle of the month. The stock was able to move above on several occasions as it was declining last year, but could never move more than a few percentage points above it. Now it dipped back down close to the trend line, but looks like it is ready to resume the upward trend it started in December.

Buy to open the April $50-strike calls on OC at $2.35 or better. These options expire on April 18. The options will double if the stock reaches $54.70 and that is below the recent high of $55.82. I suggest a target gain of 100% with a stop at $49.00.

— 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.