This Trade Targets a 100% Return in Seven Weeks

Stocks fell again on Friday and that made it four out of five days that the S&P lost ground this past week. In fact, three of the four indices lost ground four of the last five days. The lone exception was the Dow which managed a small gain on Monday.

As for Friday’s final results, the Nasdaq took the worst loss at 1.13% and it was followed by the Russell which fell 0.84%. The S&P dropped 0.53% and the Dow managed to pare its loss to only 0.26%.

[hana-code-insert name=’adsense-article’ /]Nine of the 10 sectors fell on the day with the financial sector gaining 0.39% as the only one in the black on Friday.

The tech sector dropped 1.34% for the worst loss and the communication services sector declined 1.12%.

Those were the only two sectors that lost over 1.0%.

My scans saw yet another positive result on Friday night with 38 stocks on the bullish list compared to 13 on the bearish list.

The barometer got bumped up to 12.4 from 0.7 once these results were added in to the equation.

Despite the positive reading from the scans and the positive reading on the barometer, four of the last five trade ideas have been bullish ones. Therefore today’s trade idea is a bearish one in order to keep a sense of balance. The subject stock is PBF Energy (NYSE: PBF) and it scores a 6 on its EPS rating and a C on its SMR rating from Investor’s Business Daily.

We see on the chart how the stock has been trending lower since early May and the highs connect to form the upper rail of a trend channel. We also see that the stochastic readings have reached an extremely overbought level and made a bearish crossover on Friday.

Buy to open the November 28-strike puts on PBF at $2.95 or better. These options expire on November 15. In order for these options to double the stock will need to reach $22.10. We see that the low in August was below this target price. I suggest a target gain of 100% with a stop at $27.50.

— 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.