This Trade Could Double Your Money in Five Weeks

Stocks moved lower again on Wednesday and the losses were a little worse this time around than they were on Tuesday. The Nasdaq suffered the worst loss at 0.38% and it was followed by the S&P which fell 0.20%. The Dow dropped 0.17% and the Russell just crossed in to negative territory at the end of the day and ended up with a loss of 0.01%.

The sectors were evenly split on the day with five moving higher and five moving lower. Utilities led the way after lagging for several days, the sector gained 1.30% on the day. The healthcare sector moved up 0.46% as the second best performer and the materials sector gained 0.33% for third place.

The energy sector took the worst hit on Wednesday with a loss of 1.41%.

The financial sector declined 0.95% as the second worst performer and tech fell 0.56% for the third worst performance.

My scans ran its streak of negative readings to four and the reading from last night was the most negatively skewed of the four.

There were 90 names on the bearish list and five on the bullish list.

The barometer fell to -62.6 and that is the lowest reading since February 25.

With the vast difference between the two lists, it shouldn’t surprise you that today’s trade idea is another bearish one—the fourth straight bearish play. Baker Hughes (NYSE: BHGE) was on the bearish list and it has mixed fundamental ratings. The EPS rating is above average at 73, but the SMR rating is only a C.

The daily chart is what really got my attention and you can see why. The stock has formed a downward sloped trend channel over the last few months and the stock just hit the upper rail of the channel. We also see that the stochastic readings hit overbought territory and turned over, creating a bearish crossover.

Buy to open the July 23-strike puts on BHGE at $1.45 or better. These options expire on July 19. In order for these options to double the stock will need to drop to $20.10. That is below the most recent low, but not all the way down to the lower rail. I suggest a target gain of 100% with a stop at $23.00.

— 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.