This Philip Morris (PM) Stock Trade Targets a 100% Return in Five Weeks

Three of the four indices moved lower on Thursday as fears regarding the corona virus spreading more rapidly took their toll on stocks. All four indices opened lower and actually rallied after hitting their lows in the early morning. Only the Russell was able to reach and stay in positive territory with a gain of 0.26%.

The Dow dropped 0.43% and that was the worst loss on the day. The S&P fell 0.16% and the Nasdaq lost 0.14% to round out the results.

Seven of the 10 main sectors dropped on Thursday with the industrial sector taking the worst loss at 0.56%.

The healthcare sector fell 0.47% as the second worst performer.

The utilities sector led the way with a gain of 1.11% and it was joined in positive territory by its fellow defensive sector consumer staples with a gain of 0.59%.

The communication services sector moved up 0.02% as the third one in the black.

My scans flipped again last night and the results showed 27 names on the bearish side and 11 on the bullish side.

Despite the negative result, the barometer rose slightly, moving from -14.2 to -12.5.

Today’s trade idea is a bearish one and it is on a company that I have suggested playing options on several times in the past—Philip Morris International (NYSE: PM). The company’s EPS rating is a 49 and it doesn’t have an SMR rating at this time. The return on equity isn’t calculable at this time and that is why there isn’t an SMR rating. I can tell you that the sales growth is minimal for the company and the profit margin is below average.

We see on the chart that the stock had trouble breaking the $90 level back in January and it fell rather abruptly in the second half of the month. Now the stock is facing the same resistance level and it is overbought based on the daily stochastic indicators and it was overbought based on the RSI.

Buy to open the March 90-strike puts on PM at $3.65 or better. These options expire on March 20. In order for these options to double the stock will need to drop to $82.70. The stock dropped to $82.27 in January so it won’t have to break that low for these options to double. I suggest a target gain of 100% with a stop at $89.50.

— 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.