This Enphase Energy (NASDAQ: ENPH) Trade Could Deliver a 75% Return by October

Stocks roared back on Tuesday with big gains across the board for the indices. In the case of the Nasdaq and Russell, they more than made up the losses from Monday. The Dow and S&P made up most of the losses, but not quite all of them.

The Russell led the way with a gain of 2.99% and it was followed by the Dow with a gain of 1.62%. The Nasdaq jumped 1.57% and the S&P moved up 1.52%.

All 10 main sectors moved higher on Tuesday with eight gaining at least 1.0%. The industrial sector was the top performer with a gain of 2.8% and it was followed by the financial sector with a rally of 2.48%.

The only two sectors that failed to gain at least 1.0% were consumer staples (+0.03%) and utilities (+0.43%), the defensive sectors.

With the big reversal from big losses to big gains, the scans flipped to a decidedly more positive result on Tuesday. There were 165 bullish signals generated and only 10 bearish signals.

The barometer jumped from 29.0 to 86.1 when the results were added in to the equation. The reading is the highest for the indicator since February 2.

With 165 bullish signals and only 10 bearish signals to choose from, it shouldn’t be a big surprise that today’s trade idea is a bullish one. The hardest thing was narrowing it down to one trade setup that I liked the best. Ultimately I felt like the fundamentals and chart for Enphase Energy (Nasdaq: ENPH) would give us the best odds of success. The company scores an EPS rating of 93 and an SMR rating of an A.

One of the things I liked best about the chart for Enphase was that the stock didn’t drop below the 50-day moving average over the last week. A great number of stocks did fall below their 50-day and those trend lines could now act as resistance. Instead we see that Enphase seemed to use its moving average as a springboard over the last few days. I look for the stock to move back above the $200 mark in the next month or so.

Buy to open the September 170-strike calls on ENPH at $18.75 or better. These options expire on September 17, 2021. I suggest a target gain of 75% and that means the stock will need to reach $202.82. The target is above the high earlier this month, but not nearly as high as the February peak. I suggest a stop at $159.00.

— 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.