Traders are still buying the dip. Positive economic news in the U.S. this afternoon helped spur stocks higher. I expect the positive news to continue this week. We want to stay bullish in spite of the recent volatility. Tonight I'm adding a somewhat aggressive trade in the banking sector.
In an effort to save some time and get the newsletter out a little bit faster I did not post the company description in the plays tonight. Instead you'll find a link to a company description. Just click on the word "description".
In addition to tonight's new play, keep an eye on these stocks: SNDK, PDCO, CVS, HAL, and SPLS. They all caught my eye as potential bullish candidates, although a few might need to see a slightly deeper pull back.
NEW BULLISH Plays
Wells Fargo & Co - WFC - close: 27.20 change: +0.55
Stop Loss: 26.40
Target(s): 29.25, 31.90
Current Option Gain/Loss: + 0.0%
Time Frame: 10 to 12 weeks
New Positions: Yes, see below
Why We Like It:
Shares of WFC have been sinking for the last three weeks but the stock has not shown the same sort of relative weakness you'll see in the rest of the banking sector. The action in WFC looks more like a correction and shares have found some support near prior resistance. While I'm probably a little too optimistic that the sector has found a bottom the financials are poised for a little oversold bounce. Shares of WFC produced a bullish engulfing (reversal) candlestick pattern today. It looks like a good spot to speculate on a rally since we can put our stop loss under today's low. Our first target is $29.25. Our second, much longer-term target is $31.90.
Suggested Position: Buy WFC stock @ current levels.
- or -
Buy the 2011 January $27.50 call (WFC1122A27.5) current ask $1.28
Entry on November 30 at $xx.xx
Earnings Date 01/19/11 (unconfirmed)
Average Daily Volume: 32.7 million
Listed on November 29th, 2010