This Abbott Laboratories (ABT) Trade Targets a 100% Return in Two Months

Stocks rallied again on Monday with all four main indices experiencing substantial gains. The Nasdaq led the way with a gain of 1.35%. The S&P moved up 1.21% and the Russell tacked on 1.17%. The Dow lagged the other three and was the only one that finished with a gain under one percent, it was up 0.96%.

All 10 of the main sectors moved higher for a second straight session. This time the energy sector led the way with a gain of 2.21%. The communication services sector jumped 1.54% and the tech sector was close behind at 1.53%.

[hana-code-insert name=’adsense-article’ /]The utilities sector lagged once again with a gain of 0.60%.

The materials sector had the second smallest gain at 0.78% and two other sectors (healthcare and industrials) failed to gain at least one percent.

My scans turned in a huge bullish skew on Monday with 203 names on the bullish list and only one on the bearish side—the iShares Silver Trust.

The barometer jumped from 35.1 to 109.9 as a result of the huge bullish list.

There were a number of stocks on the bullish list that I liked, but there were several factors that I had to consider.

With August options expiring on Friday, the October expirations were released on Monday for many stocks. This eliminated a few of the stocks where I liked the fundamentals and technical picture. The one stock I feel gives us the best risk/reward potential is Abbott Laboratories (NYSE: ABT). The company gets an 82 on the EPS rating and a B on the SMR rating.

The stock has been trending higher for the last four months within the confines of a trend channel. The stock just hit the lower rail of the channel last week and has since turned higher. The stochastic readings are interesting in that they did a double dip in the last few weeks and made a bullish crossover on Monday.

Buy to open the October 82.50-strike calls on ABT at $5.15 or better. These options expire on October 18. In order for these options to double the stock will need to reach $92.80. The stock will need to reach a new high to hit our target, but I think the fundamentals and the technicals support such a move. I suggest a target gain of 100% with a stop at $83.90.

— 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.