This Trade Targets a 100% Return by mid-May

Stocks saw some selling pressure hit on Wednesday with all four indices seeing significant losses. The Russell took the worst hit with a decline of 2.01%. The Nasdaq dropped 0.93% and the S&P fell 0.65%. The Dow held up the best of the four, but still lost 0.52% on the day.

Eight of the 10 main sectors fell on Wednesday with one breaking even—the utilities sector. The materials sector was the lone sector in the black on the day with a gain of 0.22%.

The healthcare sector suffered the worst loss at 1.46% and it was followed by the energy sector with a loss of 1.27%.

Those were the only two sectors that lost over one percent.

The scans produced 35 bearish signals last night and 10 bullish signals.

That marks 15 straight nights with more bearish signals than bullish ones.

The barometer dropped from -14.1 to -16.9 once these results were added in to the equation.

Today’s trade idea is another bearish one and it is on Western Union (NYSE: WU). The company’s fundamental ratings aren’t bad, but the chart outweighs the fundamentals over the short term. The company scores 64 on Investor’s Business Daily’s EPS rating system and it scores a B in the SMR ratings.

The chart shows that the stock has been trending lower since last June and a downward sloped trend channel has formed. The stock is hitting the upper rail of the channel at this time. The stochastic readings just touched overbought territory and made a bearish crossover yesterday.

Buy to open the May $19-strike puts on WU at $1.40 or better. These options expire on May 17. The options will double if the stock falls to $16.20. That would mean the stock would need to drop to a new 52-week low, but I think that can happen. I suggest a target gain of 100% with a stop at $18.40.

— 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.