This Pfizer (PFE) Trade Targets a 100% Return in Two Months

Stocks continued to fall on Monday as the trade war continues to weigh on the market. All four of the main indices fell, but it was the Nasdaq that dropped the most with a loss of 1.46%. The Russell fell 0.73%, the S&P dropped 0.67%, and the Dow held up the best but still lost 0.33%.

Seven of the 10 sectors declined on Monday with three falling over one percent. The tech sector dropped 1.71% on the day and it was followed by the communication services sector which fell 1.63%. The materials sector joined those two with a loss of 1.39%.

[hana-code-insert name=’adsense-article’ /]The utilities sector gained 0.19% as the leading sector and it was followed by the financial sector with a gain of 0.15%.

The energy sector joined those two in positive territory with a gain of 0.11%.

My scans flipped the script on Monday with a bearishly skewed reading.

There were 26 names on the bearish list and 13 on the bullish list.

This is the first negative total in the last six days.

The barometer fell from 47.9 to 24.5 once these totals were added in to the equation.

The stocks to choose from on the two lists had some odd fundamental readings.

There were a number of stocks on the bullish list with poor fundamentals and many on the bearish list had good fundamentals. Regardless, today’s trade idea is a bearish one on Pfizer (NYSE: PFE). The company has pretty good fundamentals with a 70 on the EPS rating and an A on the SMR rating.

Despite the fundamental readings, the chart suggests the stock is ready to roll over and head lower. We see how connecting the highs from December, April, and last week creates a trend line that looks pretty daunting. The stochastic readings are in overbought territory and did perform a bearish crossover yesterday.

Buy to open the July 43-strike puts on PFE at $1.95 or better. These options expire on July 19. In order for these options to double the stock will need to fall to $39.10. The stock won’t have to move to a new low in order for the options to double, so I suggest a target gain of 100% with a stop at $42.25.

— 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.