Are You Looking For A 500% Gain?

We may be a little early on today’s trade idea, but if not, then it may be as good as GLD’s 600% move.

If you’re a regular reader, then you may know (and be in) the GLD Sept. 127 calls as suggested here weeks ago.

They’re now up over 600%, but I expect another leg up in GLD to $145 or higher which will price this position at an over 1,000% gain.

The similarities between GLD and today’s idea are that we’re getting in before the sector gets hot.

If you’re interested in the next out of favor idea about to turn hot keep reading.

The retail sector has been an ugly under performer for a long time.

You can see this in its ETF (XRT) chart below.

But there have been several companies that have done well despite the sector’s headwinds.

One such company is Lululemon Athletica (LULU).

As you can see from the chart below, it’s in a strong uptrend regardless of its sector.

There are 2 reasons to focus on LULU now.

1.     The XRT ETF looks poised to break a pivotal level of $43, and if this happens, then LULU will have the wind at its back.

2.     LULU is in a strong trend, and the recent market weakness has pulled it back to obvious support.

The basic trade setup is simply to be a buyer over 181 with a tight stop under $177.

My expectation is a move to new highs, over $190.

This would yield a nice $9 move and a big gain on an options trade (read on)

However, a realistic target is $200, and this is where the big trade lies.

The Sept. $200 calls are currently trading around $5.30

If LULU moves up to $200 in the next 30 days, then these calls will be likely hand you a 100% gain.

However, if the sector turns higher, then $220 is a possibility, and that could potentially yield a 500% gain.

To be clear, the market is still in a bearish condition, so be sure to wait for LULU to trade over $181 to consider this trade.

As I’ve covered in prior posts, we’re looking for opportunities on the pull back but we may be early, so…

Trade smart,

Rick Nartarian, Chief Investment Officer
The American Investor Daily