This Bullish General Motors (GM) Trade Could Double Your Money in Seven Weeks

Stocks waffled back and forth on Monday with the indices moving from positive to negative territory several times throughout the day. The end results showed two indices in positive territory and two in negative territory. The Russell led the way with a gain of 0.46% and it was joined in positive territory by the Dow which gained 0.06%. The S&P lost 0.08% and that was the worst performance while the Nasdaq dropped 0.07%.

The sectors were evenly split as well with five moving higher and five moving lower. The consumer discretionary sector led the way with a gain of 0.59% and it was followed by the industrial sector which tacked on 0.25%.

[hana-code-insert name=’adsense-article’ /]The tech sector was the worst performer with a decline of 0.44%.

The financial sector continued to fall and was the second worst performer on Monday with a loss of 0.39%.

My scans produced a positive skew last night and that was the first positive result in seven trading days.

There were 25 names on the bullish list yesterday and 16 names on the bearish side.

The barometer jumped from -46.6 to -24.9 once these results were added in to the equation.

There were several stocks on both lists with chart patterns that I liked, but none of them showed the corresponding fundamental ratings that I was hoping for.

Regardless, today’s trade idea is a bullish one on General Motors (NYSE: GM). The company scores a 78 on the EPS rating and that is above average, but the SMR rating is only a C which is average.

The daily chart shows how the stock has been moving higher since October and a corresponding trend channel has formed. The stock is down near the lower rail currently and it is oversold. The daily stochastic readings made a bullish crossover yesterday and that is similar to the pattern that developed in late December. I look for a similar move this time.

Buy to open the May $36-strike calls on GM at $2.05 or better. These options expire on May 17. The options will double if the stock reaches $40.10. The stock moved above the $40 level in February and March, so it shouldn’t face resistance before it reaches the $40.10 level. I suggest a target gain of 100% with a stop at $36.10.

— 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.