This Bullish Etsy (ETSY) Trade Targets a 75% Return in 6 Weeks

Tuesday saw all four indices move higher and all of them saw substantial gains. The bigger gains were had by the two riskier indices while the two more conservative indices saw smaller gains.

The Nasdaq led the way with a gain of 1.39% and the Russell moved up 1.07%. The Dow tacked on 0.76% and the S&P gained 0.75%.

Seven of the 10 main sectors moved higher on the day with the materials sector leading the way.

The sector jumped 2.81% and hit an all-time high in the process. The Tech sector experienced the second best gain of 1.91%.

The utilities sector fell 1.15% as the worst performer and the healthcare sector dropped 0.90%. The energy sector was the third sector to lose ground with a decline of 0.67%.

My scans produced another negative result, but they continued to trend toward a more neutral net total. There were five bullish signals and 19 bearish signals.

The barometer moved up a little after these results were added in to the calculation, moving from -26.8 to -23.3.

With only 24 stocks to choose from between the two lists, there were only two that got my attention. One on the bearish and one on the bullish side on Etsy (Nasdaq: ETSY). Etsy appeared on the bullish list and it has mixed fundamental readings. The EPS rating is only a 43, but the SMR rating is much better at an A.

The daily chart shows how the stock has rallied sharply off of its March low, more than quadrupling since then. A trend line has formed over the last three and a half months. It connects the lows from each month and the stock just hit the line on Monday. The stock bounced yesterday and the daily stochastic indicators made a bullish crossover out of oversold territory.

Buy to open the October 120-strike calls on ETSY at $13.75 or better. These options expire on October 16. I suggest a target gain of 75% and that means the stock will need to reach $144.06. The stock peaked at $141.41 in August, so it will need to break above that previous high. I recommend a stop at $116.00.

— 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.