This PagSeguro Digital (NYSE: PAGS) Trade Targets a Potential 100% Return in Less Than 8 Weeks

Tuesday brought some selling to the market as investors braced for several key earnings reports and two big economic events in the next few days. All four indices opened lower and were in negative territory for the entirety of the day.

The Nasdaq dropped 1.21% and the Russell fell 1.13% as the worst performers on the day. The S&P lost 0.47% and the Dow recovered most of its losses and finished lower by only 0.24%.

Six of the 10 main sectors moved lower on the day while four moved higher. The biggest move of the day was a gain of 1.72% for the utilities sector. The healthcare sector rallied 0.47% as the second leading sector.

The communication services sector dropped 1.19% and the consumer discretionary sector fell 1.01% as the two worst performers. Those were the only two that lost over 1.0%.

My scans turned slightly more negative last night with 42 bearish signals generated and 10 bullish signals.

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The barometer moved into negative territory, snapping a string of six straight days in positive territory. The final reading was -15.7, down from 8.6.

Once again there weren’t any bullish signals that I liked so I have a second straight bearish idea for you today. Like yesterday, the company has decent fundamental ratings, but the chart was the main driver. PagSeguro Digital (NYSE: PAGS) was on the bearish list. The company scores a 66 on its EPS rating and a B on its SMR rating.

The thing that jumped out at me on the chart was the possible double-top pattern in the $58.50 area. We see where the stock was in that vicinity early in July before it dropped sharply and then it rallied back up to the same area last week. Since hitting that area again, the stock has dropped sharply in the last few days after it hit overbought levels with its stochastic indicators.

Buy to open the September 57.50-strike puts on PAGS at $6.40 or better. These options expire on September 17, 2021. I suggest a target gain of 100% and that means the stock will need to fall to $44.70. The target is slightly below the low between the two highs, but for the double-top to be confirmed the stock needs to move below that low. I suggest a stop at $59.00.

— 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.