This Trade Could Double Your Money by mid-August

Stocks rallied throughout the day on Tuesday to finish the second quarter much like most of the quarter, with gains. The second quarter saw the S&P gain 19.9% and that was the best Q2 on record—going all the way back to 1957.

All four main indices moved higher on the day with the Nasdaq leading the way with a gain of 1.87%. The S&P moved up 1.54% and those were the only two that didn’t fall in to the red at any point during the day.

The Russell moved up 1.42% and the Dow tacked on 0.85%. All four turned higher in to the close and all four closed near the highs of the session.

All 10 main sectors gained ground for a second straight day. The energy sector jumped 2.27% as the top performer and the healthcare sector gained 1.79% as the second best performer.

The smallest gain of the day was the utilities sector at 0.39% with industrials gaining 0.60% for the second smallest gain. Consumer staples stocks gained 0.81% and those three were the only ones that failed to gain at least 1.o%.

My scans turned in another decidedly bullish result on Tuesday with 140 bullish signals and only seven bearish signals.

The barometer jumped once again and this time the indicator moved above the 100 level for the first time since March 17.

Once again there were a number of bullish setups to choose from last night, but I liked the risk/reward relationship for the iShares Russell Mid-Cap ETF (NYSE: IWR) the best. Because it’s an ETF we don’t have the fundamental ratings like we normally cover, but I looked the artificial intelligence site (Tickeron) that I usually use and it produced a bullish signal yesterday as well. Past predictions from the site show an 89% success rate.

The chart shows an upwardly sloped trend channel forming after the March low. The fund just hit the lower rail of the channel over the last few days and looks poised to make another move to the up side. The 50-day moving average is just below the lower rail and that gives the fund two layers of support.

Buy to open the August 52-strike calls on IWR at $3.70 or better. These options expire on August 21. I suggest a target gain of 100% and that means the fund will need to reach $59.40. That target is above the June high, but below the February high and below the upper rail of the channel. I recommend a stop at $51.00.

— 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.