The Nasdaq, as well as many and most of its constituent stocks, have made quite a comeback from the Aug. 24 “mini flash crash” low. But a select few blue-chip stocks managed to defy logic by paying tribute technically to this esteemed classification during the worst of times — and are now poised to break out.
From the late August low when many Nasdaq tickers crashed lower, blue-chip stocks Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN) and Priceline Group Inc (PCLN) honored their status as industry titans by acting the part of market leaders.
Not only did these three big-dollar blue-chip stocks all but defy the carnage of the plunge in the Nasdaq, but each managed to build constructive-looking bases while demonstrating relative strength in the face of this destructive market chaos.
Now, these three tech blue chips look poised to move higher. Here’s where each could go, and how traders should tackle the moves.
Big-Money Blue-Chip Stocks That Will Break Out: Alphabet Inc (GOOG, GOOGL)
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I wrote about GOOGL stock last week thanks to promising symmetrical triangle base, which has formed over the past three to four months off its all-time-highs.
What I failed to mention — but what’s shown in the accompanying chart — is that GOOGL managed to develop the triangle above the 200-day simple moving average. That’s showing a whole lot more moxie than the Nasdaq, which still is trading in “bear territory” below its own long-term moving average.
Alphabet’s properly aligned 50-day simple moving average has been sandwiched between the pattern’s higher lows and lower highs. And with shares now consolidating tightly within the triangle and finding support from this key institutional average, GOOGL should be on your radar now.
One attractive idea is a Nov $685/$705 bull call spread.
This spread is now priced a bit higher at $8.20 mid-market, but still holds maintains a solid risk-to-reward profile while reducing unwanted factors such as time decay and volatility risk. It’s also placed so traders can participate in the Oct. 22 earnings event for this blue-chip stock and still have time on the calendar before expiring.
Big-Money Blue-Chip Stocks That Will Break Out: Amazon.com, Inc. (AMZN)
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The weekly chart of Amazon depicts a base that has put in a triangle pattern above a couple other pattern breakouts, as its coils just off its all-time highs. Now over the past week, AMZN stock has tightened up and is ready for a breakout.
The triangle isn’t picture-perfect, but given the wildly off-the-chart price swings we’ve seen since August, perfection isn’t exactly suited for the market.
Keeping in mind Amazon’s Oct. 22 earnings release, traders should look at the Nov $555/$575 bull call spread for $8.70 or better.
Big-Money Blue-Chip Stocks That Will Break Out: Priceline Group Inc (PCLN)
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Shares of PCLN are the most expensive on the Nasdaq on a per-share basis — and based on what I can see on the charts, they’re not about to get any cheaper.
The accompanying chart shows a bullish inverse head-and-shoulders pattern that has been followed up by a base-on-base “W” formation. As the second and equally bullish formation in PCLN has developed around an initial failed breakout attempt of the larger pattern’s neckline, we can’t help but be persuaded to see strength in numbers and at least two solidly built reasons for markedly higher prices for this blue-chip stock.
Priceline reports sometime in early November. In conjunction with its hefty four-digit price tag, a vertical once again makes sense.
The Dec $1,360/$1,400 bull call spread for $17.50 or better fits in well with a breakout taking hold, while significantly reducing the risk of owning stock or buying an outright call.
And if PCLN shares do in fact challenge the all-time highs of $1,395, we might not be entirely in the money, but Christmas still will have come merrily early.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
