This Trade Targets a 100% Return in Ten Weeks

The indices were mixed on Thursday with two moving higher and two moving lower. The Dow led the way with a gain of 0.85% and it was joined in positive territory by the S&P which tacked on 0.23%. Both of those indices closed at record highs.

The Russell dropped 0.46% and that was the worst loss of the bunch while the Nasdaq fell 0.08%.

Despite the split in the indices, all 10 of the main sectors moved higher on the day.

The industrial sector led the way with a gain of 0.68% and it was followed by the financial sector which moved up 0.57%.

The healthcare sector gained a measly 0.02% and that was the worst performance of the day.

The utilities sector was close behind with a gain of 0.03%.

My scans continue to produce negative results, but the difference between the two lists is narrowing.

There were 25 names on the bearish list last night and 15 on the bullish list.

The barometer continued to climb as the differential between the lists narrowed for a third straight night. The final reading for Thursday was -31.6 after a reading of -46.7 on Wednesday.

There were only a few stocks from each list that even remotely got my attentions, but the one the stood out the most was Crocs (Nasdaq: CROX) and it was on the bearish list. The company’s fundamental ratings are mixed with an EPS rating of 30 and an SMR rating of a B.

The stock has been trending lower since January while the rest of the market has been rallying. Over the last few weeks Crocs has rallied a little and that brought up close to its 50-day moving average, but it wasn’t able to break through before falling two out of the last three days. The daily stochastic readings reached overbought territory and have now made a bearish crossover.

Buy to open the September 21-strike puts on CROX at $2.15 or better. These options expire on September 20. In order for these options to double the stock will need to drop to $16.70. That price is below the recent low, but I think the stock can move even lower based on the technical weakness and the earnings struggles. I suggest a target gain of 100% with a stop at $21.00.

— 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.