This Trade Targets a 75% Return in One Month

I may have jinxed the market yesterday by talking about how it was attempting to counter the five straight down days with five straight up days. Thursday saw the indices meander without much of a push from the bulls or the bears. At the end of the day, three of the four would finish lower with only the Dow (+0.03%) gaining ground. The Russell took the worst loss, but even that was only 0.29%. The Nasdaq lost 0.16% and the S&P fell 0.09%.

The sectors were mixed with seven moving lower and only three moving higher. The worst performance of the day came from the materials sector with a loss of 0.75% and it was followed by the communication services sector with a decline of 0.44%.

[hana-code-insert name=’adsense-article’ /]The financial sector led the way on Thursday with a gain of 0.42%.

It has been quite some time since the financial sector was the leading gainer.

Joining financials on the plus side were the tech sector (+0.21%) and energy (+0.09%).

The streak of positive results from my scans came to a halt after four days.

Last night’s scans produced 41 bearish signals and five bullish ones.

With the negative skew, the barometer dropped to 19.3 from 57.8.

Despite the large number of signals on the bearish side, there weren’t very many scenarios that jumped out at me. There were some poor fundamental ratings, but the charts didn’t support the bearish play. One chart that stood out was the iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT).

We see on the chart how the fund has struggled at the $122.25 level three times in the last month and a half. The TLT hit that level again earlier this week before turning lower yet again. The daily stochastic readings hit overbought territory and have now made a bearish crossover.

Buy to open the April $122-strike puts on TLT at $1.95 or better. These options expire on April 18. The options will double if ETF falls to $118.10. The low earlier this month was around $118.60, so don’t get caught up in trying to get a double on this trade idea. I suggest a target gain of 75% with a stop at $122.00.

— 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.