Stock prices are elevated, and volatility is depressed. What more could a bull ask for? The S&P 500, along with virtually every other major index, closed last week at yet another all-time high. But despite the broader market gravitating higher nearly every single day, there is quite a bit of rotation going on. And that works out to the favor of spectators seeking stocks to buy.
Indeed, pattern spotters had a fruitful weekend. Their bags are teeming with attractive setups, from retracements and breakouts to flags and pennants.
Three such setups will be on full display today. They’re all liquid and potential candidates for options trading as well. Check out these three stocks to buy.
3 Stocks to Buy: Delta Air Lines (DAL)
Delta Air Lines, Inc. (NYSE:DAL) shares recently returned to an uptrend during a rousing, high-volume breakout that delivered shares back above all major moving averages. Traders unwilling to chase will be happy to note, however, that DAL stock just fell back to a pivotal support level, providing an attractive, low-risk entry.
What we’re seeing is a re-test of the breakout area ($49.50). And if old resistance becomes new support, we should see buyers step up to kick-off a new advance. If options trading is your gig, the implied volatility is still slightly elevated, so short premium strategies are worth a shot.
If DAL stock trades above Friday’s high ($50.69) then sell the Dec $48/$45 bull put spread for 53 cents.
3 Stocks to Buy: Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) shares boast one of the cleanest pullback setups on the Street. They recently broke out of a three-month base on heavy volume. The catalyst for the surge was an earnings report which gave shareholders something to cheer about.
Last week’s profit-taking ushered JNJ back to its rising 20-day moving average, and now a low-risk entry is in the offing. With an implied volatility rank of 57%, options in JNJ remain pumped even more than DAL.
To profit from continued strength, sell the Dec $135/$130 bull put spread for 58 cents. If the stock remains above $135 for the next month, you’ll capture the max reward of 58 cents.
3 Stocks to Buy: Nike (NKE)
Nike Inc (NYSE:NKE) shares have been locked in a trading range all year long. Earnings reports have sent the stock ping-ponging back and forth every quarter making it difficult for a directional trend to take root. With the recent upside breakout, buyers have once again wrested control, and I think NKE is worth trading to the long-side.
Last week’s pullback carried the stock right back to support, and Friday’s bullish reversal candle confirmed dip buyers want in. To join them, buy the Jan $55/$60 bull call spread for $3.40. You can more than double your money if NKE can rise above $60 over the next two months.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
