This Bullish Trade Targets a 100% Return in 6 Weeks

The indices gapped higher Wednesday morning after several central banks took action to ease monetary policies. All four jumped out of the gate and then moved even higher until the last hour of trading when they dropped a little.

The Nasdaq led the way with a gain of 0.87% and it was followed by the Russell with a move of 0.54%. The S&P tacked on 0.47% and the Dow moved up 0.40% to round out the results.

Seven of the 10 main sectors moved higher on Wednesday.

The energy sector led the way when it jumped 1.33%.

The tech sector gained 1.19% and was the only other sector to gain more than 1.0%.

The utilities sector fell 1.08% as the worst performer while consumer staples (0.11%) and industrials (0.04%) joined it in negative territory.

My scans remained negative on the day, but the results were as negative as what we saw on Tuesday. There were 50 names on the bearish list and nine on the bullish list.

The barometer dropped a little further in to negative territory with a reading of -55.8. The final reading on Tuesday was -53.5.

Despite the large number of stocks on the bearish list, there was only one that looked like a decent setup, but the option pricing didn’t make sense. That left a stock from the bullish list that I liked the look of the chart, the fundamentals, and the option pricing. The company is Apollo Global Management (NYSE: APO) and it gets a 76 on the EPS rating system and a B on the SMR grading scale.

The daily chart shows how the stock has been moving higher over the last six months and a trend channel has formed that defines the various cycles within the overall trend. The stock just hit the lower rail of the channel and looks poised to bounce. We also see that the stochastic indicators are near oversold territory and made a bullish crossover last night.

Buy to open the April Week 1 45.50-strike calls on APO at $2.45 or better. These options expire on April 3. In order for these options to double the stock will need to reach $50.40. The stock peaked at $51.68 in January so it won’t have to reach a new high to hit the target. I suggest a target gain of 100% with a stop at $45.50.

— 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.