This Bullish Trade Targets a 75% Return in Two Months

Friday looked like a replay of Thursday as all four of the main indices opened lower and then moved higher throughout the day to finish with gains. The losses weren’t as sharp at the open and the rally started a little earlier, but by the end of the day all four of the indices finished with solid gains.

The Russell jumped 1.57% to lead the way and the Nasdaq tacked on 0.79% as the second best performer. The S&P moved up 0.39% and the Dow logged a gain of 0.25%. All four indices lost ground on the week.

The sectors were more mixed than I would have expected given the gains from the indices, but only six moved higher while four moved lower.

The communication services sector led the way with a gain of 1.38% and the consumer discretionary sector moved up 1.17% as the only other sector to gain over 1.0%.

The utilities sector took the worst loss at 1.33% while financials fell 0.66% as the second worst performer.

For the week, nine of the 10 sectors lost ground.

My scans reversed course in a big way on Friday with 101 bullish signals and only five bearish signals.

The barometer jumped from –38.6 to 16 as a result of the big bullish skew.

With the scan results totally skewed to the bullish side, today’s trade idea is another bullish one. The company is ProLogis (NYSE: PLD) and it scores well on the fundamental ratings. The EPS rating is a 73 and the SMR rating is an A.

The stock rallied sharply off its March low and then moved sideways for a while. It dipped in the middle of last week, but found support at its 50-day moving average. The daily stochastic indicators dropped in to oversold territory and made a bullish crossover on Friday.

Buy to open the July 80-strike calls on PLD at $7.40 or better. These options expire on July 17. I suggest a target gain of 75% for this trade and that means the stock will need to reach $92.95. The stock peaked above $94 in April, so it won’t have to break that high for us to hit our target. I suggest a stop at $81.25.

— 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.