This Cisco (CSCO) Trade Targets a 100% Return by mid-January

Stocks were mixed on Friday after the August employment report fell short of expectations. The indices ended with two moving higher and two moving lower. The Dow led the way with a gain of 0.26% and the S&P notched a gain of 0.09% as the other one in positive territory.

The Russell fell 0.37% and lagged the whole week. The Nasdaq dropped 0.17% on Friday and moved back and forth across the breakeven line several times throughout the day.

Sector performance was mixed on the day with six moving higher and four moving lower.

Energy stocks led the way with the sector gaining 0.53%.

The materials sector was the second best performer with a gain of 0.39%.

On the downside, the utilities sector fell 0.40% as the worst performer and the communication services sector dropped 0.22%.

My scans turned in a fifth straight negative result on Friday with 23 names on the bearish list and nine on the bullish list.

The barometer changed little with these results, moving up from -25.3 to -22.3.

There weren’t any stocks on either list that met my requirements for the trade idea today, so I looked at another scan that I use for today’s idea. Cisco Systems (Nasdaq: CSCO) was on a bullish scan with a longer time horizon. The company scores an 88 on the EPS rating scale and it gets an A in the SMR ratings.

The weekly chart shows how Cisco has been trending higher over the last few years. It dropped after its recent earnings report, but it looks like the selling went too far and now the stock looks poised to move higher again. We see that the weekly stochastic readings are the lowest they have been in the last three and a half years and they just made a bullish crossover.

Buy to open the January 47-strike calls on CSCO at $4.00 or better. These options expire on January 17. In order for these options to double the stock will need to reach $55.00, at least on an intrinsic basis. The stock was recently above the $58 level, so it won’t have to hit a new high to reach the target. I suggest a target gain of 100% with a stop at $45.90.

— 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.