This Trade Targets a 100% Return by mid-May

The second quarter got off to a rough start on Wednesday with all four main indices getting hit with significant losses. I have to wonder if the gains from last week weren’t partly due to window dressing for the end of quarter stats from portfolio managers.

The Russell took a much bigger hit than the other three indices as it dropped 7.03%. The Dow lost 4.44% as the second worst performer while the Nasdaq and S&P each declined 4.41%.

All 10 main sectors dropped on Wednesday with the financial sector falling the most at 6.10%.

Utilities lost 6.01% and those were the only two sectors to lose more than 6%.

The consumer staples sector took the smallest loss at 1.69%.

The healthcare sector dropped 3.8% and that was the second smallest loss.

My scans continued to move to a more negative stance with 72 bearish signals and only one bullish signal.

The barometer dropped to -40.9 from -14.2 thanks to these results. The reading is the lowest one we have seen since February 20—right as the selloff was getting started.

Once again we have a bearish trade idea and that makes it four straight days with bearish trades. In the case of today, Marvell Technology Group (Nasdaq: MRVL) was on the bearish list and its fundamentals were weak. The company scores a 31 on the EPS rating system and it scores a D on the SMR grading scale.

The chart shows how the stock hit resistance at its 50-day moving average on Tuesday and then moved lower yesterday. We see a similar pattern in early March, just before the stock fell from the $24 range down below $17. The stochastic indicators are in overbought territory and made a bearish crossover last night.

Buy to open the May 24-strike puts on MRVL at $3.35 or better. These options expire on May 15. For these options to double, the stock will need to drop to $17.30. The stock was below $17 in March, so it won’t have to reach a new low to reach our target. I suggest a target gain of 100% with a stop at $23.60.

— Rick Pendergraft

See What One Ticker... One Trade... EVERY WEEK... Can Do for YOU [sponsor]
New research proves that trading one ticker every week has had the ability to produce extraordinary gains... Including a rare 2,614% in under 11 days. See this groundbreaking new discovery for yourself. SHOW ME ONE TICKER PAYOUTS

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.