This Bullish Trade Targets a 75% Return in 9 Weeks

Stocks finished mixed on Friday after opening with gains for all four indices. By the end of the day there were two in the black and two that finished in the red. The Dow led the way with a gain of 0.48% and the S&P eked out a gain of 0.05%.

The Russell took the worst hit with a loss of 0.70% and the Nasdaq joined it in negative territory with a drop of 0.60%.

Eight of the 10 sectors moved higher on Friday while two fell.

The industrial sector led the way with a gain of 1.36% and the materials sector gained 1.28% as the second best performer.

Those were the only two sectors with gains over 1.0%.

The tech sector was the worst performer with a decline of 0.76% and the communication services sector fell 0.32% as the other sector that lost ground.

My scans turned decidedly more positive on Friday with 67 bullish signals compared to only four bearish signals.

The barometer jumped 20 points once these results were added to the equation, climbing to 38.7 from 18.7.

Today’s trade idea is the fourth straight bullish one, but with so few bearish signals there just weren’t any on that side of the equation that looked very good. Accenture (NYSE: ACN) appeared on the bullish list and it is a stock I have watched closely for a long time. The company scores an 85 on the EPS rating scale and it gets an A on the SMR grading system.

The channel on the chart is called a Raff Regression channel. The middle line is the regression line and the two outer bands are spaced equal distances from the regression line based on the widest margin from the regression line. In this case the lower rail sets up the spacing and it was the low in mid-May that set the distance. The stock hit that lower rail this past week.

Buy to open the November 230-strike calls on ACN at $15.80 or better. These options expire on November 20. I suggest a target gain of 75% and that means the stock will need to reach $257.65. The stock gained 20% in less than a month the last time the stock was as close to the lower rail of the channel as it is now. A 20% gain from the recent low would put the stock over $276. I recommend a stop at $225.00.

— 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.