Trade This Stock’s Drop For a 75% Return in Two Months

Tuesday started out as a mixed day for the indices with three of the four starting the day in negative territory. At midday three of the four were in positive territory and by the end of the day all four were in negative territory.

The Russell ended up with the biggest loss at 1.95% even though it was in positive territory in the afternoon. The Dow fell 1.59% and the S&P dropped 1.05%. The Nasdaq was the lone index that started in positive territory and it remained there until the final half hour when it dropped sharply and finished with a loss of 0.54%.

All 10 sectors finished in the red on Tuesday but the percentages varied greatly.

The energy sector fell 2.8% and that was the worst loss of the bunch.

The financial sector dropped 2.44% and that was the only other loss over 2.0%.

The communication services sector dropped 0.02% as the top performer and the consumer discretionary sector only declined 0.36%.

My scans produced very few signals from either side last night.

There were 13 bearish signals and only two bullish signals. The total of 15 signals is the smallest since March 30.

The barometer dropped from 50.8 to 35.5 once these results were added in to the equation.

I didn’t like any of the setups from either of the lists, so I turned to a different resource and found a bearish trade that I like. Teck Resources (NYSE: TECK) got a bearish signal from Tickeron’s AI platform and the company has an EPS rating of 47 and the SMR rating is a D. The confidence level for the signal was 89%.

Teck Resources broke above its upper Bollinger band on Wednesday and the 10-day RSI hit overbought territory at the same time. The recent rally helped the stock fill the gap from back in March and I look for it to reverse course now.

Buy to open the July 10-strike puts on TECK at $1.32 or better. These options expire on July 17. I suggest a target gain of 75% and that means the stock will need to reach $7.69. The stock was under $7.00 as recently as April 27 and below $6.00 in March. I suggest a stop at $10.30.

— 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.