The S&P 500 is within spitting distance of all-time highs and bulls everywhere are engaging in pre-breakout rituals to curry favor with the market gods.
Whether their pleas fall on deaf ears remains to be seen. Remember, we’ve been here before, and last time we tried to break above the high of our range-bound prison, buyers were denied in spectacular fashion.
See the January swoon for all the gory details.
If you’re looking to back the bulls here — if you think finally, FINALLY, we surpass the prior peak, bringing glory and good fortune to stock owners everywhere — then read on. Despite a slightly overbought market, these three stocks are primed for breakouts.
Their bases have been built, their breath caught. And a renewed advance may be just around the corner.
3 Breakout Candidates: Salesforce.com, Inc. (CRM)
Salesforce.com, Inc. (CRM) finds itself sitting comfortably in an uptrend. Its ascent off the February lows has been relentless. A few mild pullbacks have punctuated its rise, but nothing worth noting. The latest catalyst driving CRM was last month’s earnings announcement.
The stock popped 5.6% overnight and hasn’t looked back since. In fact, it has spent the last two weeks resting. Consider the chop a necessary pause to digest its gargantuan gains and set up a base to launch from during its next breakout.
CRM option premiums are the cheapest they’ve been all year so consider grabbing the Aug $82.50 calls on a break above the $84.50 resistance zone.
3 Breakout Candidates: Microsoft Corporation (MSFT)
Microsoft Corporation (MSFT) captured a spot in today’s missive on account of its bull flag pattern. The buyers banner has been flying in MSFT for a week now, signaling a potential breakout play in the making. Unlike CRM, MSFT gapped lower on earnings, bringing pain and anguish to shareholders.
But they aren’t giving up without a fight. MSFT has based nicely over the past six weeks. Last week’s attempt at reclaiming the 50-day moving average (blue line in chart) was rebuffed, but don’t count out MSFT bulls just yet. The earnings gap wants to be filled, and if the overall market succeeds in taking out the prior highs, Microsoft may well be carried higher amid the euphoria.
The fire sale in option premiums continues with MSFT. Consider buying the Aug $52.50 call on a successful break of the 50-day moving average.
3 Breakout Candidates: International Business Machines Corp. (IBM)
Once upon a time, International Business Machines Corp. (IBM) was a battered stock ridiculed by bulls everywhere. Now the tech stock is getting its revenge. IBM has rallied 30% off its February lows, reclaiming the high ground above all its major moving averages.
A tight base has developed over the past two weeks, creating a low-risk entry for traders looking for more upside. With stocks falling in early trading, today may not be the day to jump aboard, but watch for a break of $154.50 in the coming week.
Upon such a break, consider grabbing the Aug $155 calls.
At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.
