This iShares MSCI Emerging Markets ETF (NYSE: EEM) Trade Targets a Potential 75% Return in Two Months

Friday saw stocks bounce back sharply. All four of the main indices opened in positive territory and moved higher throughout the day.

The Russell led the way with a gain of 2.17% while the Dow gained 1.30%. The S&P rallied 1.13% and the Nasdaq just missed the 1.0% mark with a gain of 0.98%.

All 10 main sectors moved higher on Friday and four gained over 1.0%. The financial sector was the top performer with a gain of 2.89% and it was followed by the energy sector which jumped 2.13%.

The utilities sector only moved up 0.12% and that was the smallest gain on the day. The healthcare sector tacked n 0.34% for the second smallest gain.

My scans flipped back to positive in a big way on Friday with 104 bullish signals and 19 bearish signals. That stopped a string of three straight negative results.

The barometer turned positive with the strong positive result, finishing at 25.8 after a reading of -10.1 on Thursday.

Even though there was a huge skew to the bullish side on Friday’s scans, there weren’t a great number of setups that I liked. The one I felt gave us the greatest odds of success was on the iShares MSCI Emerging Markets ETF (NYSE: EEM). We have seen a number of emerging market ETFs on the bullish list in the last few days and now we finally see one of the most active ETFs getting a bullish signal.

We see on the chart how the fund trended higher from November through February, but then went through a little downturn. A new trend formed off the March low and a trend channel has formed. The fund hit the lower rail of the channel last Thursday and then gapped higher on Friday. I look for the trend to continue over the next month or more.

Buy to open the September 52-strike calls on EEM at $3.20 or better. These options expire on September 17, 2021. I suggest a target gain of 75% and that means the fund will need to reach $57.60. The target is above the June high, but below the February high. I suggest a stop at $52.20.

— 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.