This Wendy’s (WEN) Trade Targets a 100% Return in 6 Weeks

Stocks wavered back and forth a little on Wednesday with the indices not really moving too far away from the breakeven point at any point. There were some concerns about the trade talks and whether or not the first phase of the agreements will actually get signed. That sent the indices down toward midday, but they recovered most of the losses from that drop.

The Russell dropped 0.63% and that was the worst loss on the day and it was joined in the red by the Nasdaq which fell 0.29%. The S&P inched up 0.07% and the Dow was basically unchanged—it lost 0.07 points, points not percentage points.

Six of the 10 sectors moved higher on Wednesday with the financial sector leading the way with a gain of 0.51%.

The consumer staples sector moved up 0.41% as the second leading performer.

The energy sector got hit hard and fell 2.04% on the day.

Oil fell over 1% on the day and didn’t help the sector.

The communication services sector declined 0.35% and that was the second worst performance on the day.

The scans turned more negative last night with 57 names on the bearish list and only 10 names on the bullish list.

The barometer dropped from -8.7 to -22.8 once these results were added in to the equation.

After a couple of bearish trade ideas in a row, I have a bullish trade idea for you today.  Wendy’s (Nasdaq: WEN) appeared on the bullish list last night and the company reported earnings yesterday morning. It beat its EPS estimate, revenue estimate, and raised its guidance. The company scores a 95 on the EPS rating and an A on the SMR score.

Wendy’s has been trending higher since March and a trend channel has formed over the last few months. The stock hit the lower rail of the channel earlier this week and bounced a little. We also see that the stochastic readings were in oversold territory and made a bullish crossover last night.

Buy to open the December 20-strike calls on WEN at $1.15 or better. These options expire on December 20. In order for these options to double the stock will need to reach $22.30. The stock was as high as $22.80 in September, so it won’t have to break to a new high. I suggest a target gain of 100% with a stop at $22.30.

— 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.