This CSX (CSX) Trade Targets a 100% Return by mid-July

Stocks continued to rally back from the selling last week and from earlier this week with all four indices posting significant gains on Thursday. The Nasdaq led the way once again and it was up 0.97%. The S&P gained 0.89% and the Dow tacked on 0.84%. The Russell lagged the other three indices once again, but still managed to move up 0.58%.

The sector performances were a little more consistent on Thursday and all 10 moved higher. The materials sector led the way with a gain of 1.36%.

That was the only sector that moved up more than one percent, but there were four more that gained at least 0.9%.

The energy sector posted the smallest gain at 0.59% and it was followed by the utilities sector with a gain of 0.67%.

My scans moved even more to the positive side on Thursday with 133 bullish signals and eight bearish signals.

This caused the barometer to jump to 66 and that is the highest reading since March 12.

There were an abundance of stocks to choose from on the bullish list due to the sheer number of stocks, but the one stock that I liked best for today’s trade idea was CSX Corp. (NYSE: CSX)). The company scores a 94 on the EPS rating and an A on the SMR rating. Those fundamentals combined with the chart and the risk/reward relationship are the reasons the stock was chosen.

We see the trend channel on the daily chart and the stock just touched the lower rail. This trend channel was drawn by connecting the highs first and then drawing a parallel lower rail that connects the low from December with the low from earlier this week. The 50-day being in close proximity is also a factor.

Buy to open the July $77.50-strike calls on CSX at $3.40 or better. These options expire on July 19. In order for these options to double the stock will need to reach $84.30. That is above the most recent high, but I think the stock can get there. I suggest a target gain of 100% with a stop at $76.25.

— 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.