This week’s Momentum Trader Alert recommendation is MasterCard Inc. (MA), which develops and markets payment solutions.
The company also provides industry-leading analysis and consulting services to financial institution customers and merchants. MasterCard’s family of brands includes MasterCard, Maestro and Cirrus.
MasterCard Inc. (MA) versus the S&P 500 year to date.
Momentum Trader Alert Analysis
Buy MasterCard Inc. (MA) at market today and place your stop at $108.00.
If you want to play the options, I recommend the MA July $115 calls (MA170721C00115000), which last traded at $3.40 and expire on July 21.
Momentum Trader Alert is all about betting alongside the rising tide of the market.
That, however, is a challenge to do when the stock market has been locked in a tight trading range, as it has been since Valentine’s Day.
That’s why I have not recommended many options recently in Momentum Trader Alert.
This week, however, I am betting that the U.S. stock market will awake from its range-bound lethargy and resume its upward momentum.
First, last week, several of your Momentum Trader Alert positions broke out of long-term trading ranges to the upside. These recommendations include Lam Research Corporation (LCRX), which soared 11.83% this past week; MKS Instruments Inc (MKSI), which jumped 9.48%; and Take-Two Interactive Software (TTWO), which leaped 8.27%.
Once momentum returns to the market, gains can come quickly.
Second, U.S. market sentiment has soured on the Trump trade.
On the one hand, according to the respected American Association of Individual Investors (AAII) survey, individual investors are as invested in stocks as they’ve ever been.
On the other hand, these same investors have turned surprisingly pessimistic on the market. Over the past four weeks, the AAII survey’s “Bull Ratio” has dropped to 40% — the lowest level since the horrible start to 2016.
The good news is that such deep pessimism sounds the trumpets for a perfect buying opportunity.
In the past, when the AAII’s “Bull Ratio” has been this low, the average return for the S&P 500 over the next three months has been 5%, with an 83% win rate.
It’s hard to get better odds than that.
So this week, I am recommending that you buy call options on several of your current Momentum Trader Alert positions.
1) Buy the Broadcom Inc. (AVGO) July $210 call options (AVGO170721C00210000), which last traded at $17.10 and expire on July 21.
2) Buy the Stryker Corp. (SYK) June $135 call options (SYK170616C00135000), which last traded at $2.88 and expire on June 16.
3) Buy the Wintrust Financial Corporation (WTFC) May $70 call options (WTFC170519C00070000), which last traded at $1.30 and expire on May 19.
You should understand that options are higher-risk plays.
Yes, you have the potential of generating double-digit-percentage gains very quickly as the market bounces.
But you also put the full value of your investment at risk.
Raise your stop in Lam Research Corporation (LRCX) to $139.60 to lock in at least a 10% gain in the stock.
Raise your stop in Healthcare Services Group (HCSG) to $45.40 to lock in at least a 10% gain in the stock.
Nicholas A. Vardy