Trade This Stocks Drop for a 75% Return in Eight Weeks

Thursday continued the trend for the week with stocks losing ground. So far this week we have seen gains followed by losses on a day to day basis. All four indices opened in positive territory, but by the end of the day three were in the red. The Russell managed to hang on to a gain of 0.10%.

The Nasdaq dropped 0.97% as the worst performer and the S&P was close behind with a loss of 0.78%. The Dow fell 0.41% on the day.

Eight of the 10 sectors lost ground on Thursday with consumer discretionary and industrials gaining ground.

The discretionary sector rose 0.30% and the industrial sector gained 0.22%.

The energy sector was one of four sectors that lost over 1.0% as it dropped 1.6%.

The tech sector lost 1.39% and it was the second worst performer.

My scans turned a third straight negative result last night with 39 bearish signals and three bullish signals.

The barometer dropped in to negative territory once these results were added in, falling from 12.1 to -15.8.

Today’s trade idea is a third straight bearish one. Helmerich & Payne (NYSE: HP) appeared on my bearish scan last night and the fundamentals are pretty bad. The company scores an 8 on the EPS rating scale and a D on the SMR grading system.

The daily chart shows how the stock has had trouble breaking back above the $20 level since dropping below it in early March. The stock has tested the resistance on two previous instances and failed both times. We see that the stochastic indicators hit overbought territory and made a bearish crossover last night.

Buy to open the July 20-strike puts on HP at $3.10 or better. These options expire on July 17. I suggest a target gain of 75% and that means the stock will need to reach $14.55. The low in early May was $14.55 so we need it to hit that low again. I suggest a stop at $20.30.

— 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.