Trade of the Day: Lowe’s (LOW)

My indicators are neutral, as is my personal bias. I expect to see some short-term rallying action given that this is historically a bullish time period, but I don’t think we’ll see any great gains because stocks and indices are running into an area of huge resistance.

After the post-holiday cheer dissipates, I’d say we have a good chance of major decline if only because of tax-loss selling. There are many stocks in bear markets now where institutional investors have losses, and this is the time when they are trying to take advantage of the tax system to get out of losing positions.

Looking out further, my prediction is that 2016 will not going to be a good year for the market. Last week, I detailed all of the evidence for an impending recession in the United States. And, as Japan is in a confirmed economic downturn, it looks like Europe will also slip into a recession; the threat of terrorism is accelerating this development.

Building on my thoughts from last week, if we look at individual stocks and analyze their new highs and new lows, there have been more new lows than new highs each week for a long time. Of course, as I’ve said, the rally for any stocks making new highs has been very narrow. In addition, corporate earnings for the last four quarters have been declining.

So, I’ll continue to weight new recommendations to my Power Options Weekly members on the bearish side and pepper in insurance plays, but I’m not averse to taking advantage of bullish plays that can buck the trend.

After several weeks of bearish recommendations, I have a call option for you to play the short-term run.

Buy to open the Lowe’s (LOW) Jan 80 Calls at $1.00 or lower.

After entry, take profits if the stock price hits $80.70 or the option price hits $2.4. Exit if the stock price closes below $76.00.

If an option or its underlying stock does not hit its target, or if the stock does not close at or below its sell signal price within three weeks of entry, close the position. I do not recommend holding an option play for more than three weeks.

Remember that U.S. markets will close early today at 1 p.m. Eastern, and will resume normal hours on Monday.

InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. It’s the perfect ‘bridge’ between investing in ordinary stocks and the turbocharged world of options trading.

Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990. Try Power Options Weekly today and receive 2 weeks for the price of 1 for only $19.95.

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