Trade Virgin Galactic (NYSE: SPCE) for a Potential 75% Return in Two Months

Stocks saw some selling pressure on Tuesday and the indices gave back some of the gains from Monday. The retail sales report for October came in below expectations and that got the market off to a rough start, but all four indices closed well off their lows.

The Russell ended up finishing in the black with a gain of 0.37%, but it was down in the early going as well. The Nasdaq fell 0.21%, the S&P dropped 0.48%, and the Dow lost 0.56%. All three were much lower in the morning session.

In a reversal from Monday, nine of the 10 sectors lost ground on Tuesday. The only sector that managed to log a gain was the energy sector which moved up 1.02%. The second best performer was the financial sector which lost 0.14%.

The worst performer on the day was the utilities sector with a loss of 1.96%. It was the only sector that lost over 1.0%. The consumer staples sector fell 0.72% as the second worst performer.

My scans produced negative results once again and the string of negative days has now reached eight days. Last night’s results showed 20 bearish signals and two bullish signals.

The barometer continued to rise and finished with a reading of -21.4. The reading for Monday was -27.0.

After a couple of bullish trade ideas in a row, I have a bearish one for you today. The company is Virgin Galactic Holdings (NYSE: SPCE) and it appeared on the bearish list last night. The company’s fundamental ratings are really bad with an EPS rating of 14 and an SMR rating of an E.

We see on the daily chart that the stock has been trending lower for the last four months. If you connect the highs from July and October it gives us a downward sloped trend that is right in the $23 area currently. I look for the stock to go through its next downward cycle over the coming weeks.

Buy to open the January 23-strike puts on SPCE at $4.10 or better. These options expire on January 15, 2021. I suggest a target gain of 75% and that means the stock will need to drop to $15.82. The stock bottomed around the $15 level on two occasions in September, but the stock won’t have to break that low to hit our target. I recommend a stop at $23.00.

— Rick Pendergraft

America's top stock picker: Sell these 25 stocks now [sponsor]
Eric Fry is widely considered the best stock picker in America - he's found 40 stocks that have gained 1,000% or more. And today, Fry says America's most popular brand is a "must sell" in the stock market. Learn more, including more info on Fry's next 1,000% or higher potential winner, by going here.

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.