Trade Texas Instruments (NASDAQ: TXN) (Again!) For a Potential 100% Return by mid-July

Wednesday’s trading action was almost an exact opposite from Tuesday’s. All four indices opened higher and then dipped a little before rallying again. Unfortunately stocks would take another downturn and two of the four indices would finish lower.

The Nasdaq dropped 0.37% on the day and that was the worst performance of the bunch. The Russell joined it in negative territory with a loss of 0.31%. The Dow would lead the way once again and this time it was with a gain of 0.29%. The S&P eked out a gain of 0.07%.

The sectors were evenly split once again with five moving higher and five moving lower. Energy stocks led the way with a gain of 3.39% for the sector. The materials sector jumped 1.27% for second place.

Utilities were the worst performer on Wednesday as the sector fell 1.69%. The consumer discretionary sector fell 0.31% as the second worst performer.

My scans stopped a seven-day negative streak last night with 27 bullish signals and 13 bearish signals. Tech stocks represented over half of the bullish signals.

The barometer jumped quite a bit after last night’s results were added in to the calculation. The indicator came in at -14.0 last night after a reading of -40.3 on Tuesday.

Today’s trade idea is one of those tech stocks I mentioned earlier and it is a name I have suggested many times before. Texas Instruments (Nasdaq: TXN) appeared on the bullish list and it has great fundamental ratings. The EPS rating is a 91 and the SMR rating is an A.

We see the trend channel that has been in play over the last seven months or so. The stock just hit the lower rail of the channel and looks like it is ready to turn higher. We see how the stochastic indicators made a little double bottom pattern and I noticed the same type of pattern last September. The stock rallied over 16% after that double bottom. If we get a 16% move this time, the stock will move above $203.

Buy to open the July 180-strike calls on TXN at $9.85 or better. These options expire on July 16, 2021. I suggest a target gain of 100% and that means the stock will need to reach $199.70. That target is above the high in April, but the upper rail of the channel will be above that price level in a week or so. I suggest a stop at $175.40.

— 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.