Stocks are entering the new week a stone’s throw from all-time highs. Not that this is anything new, mind you. If you think about it, that particular comment could have been uttered during virtually any week this year.
The fact that we’re entering the heart of December and it’s still valid is a testament to just how relentless this bull run has been. Traders seeking the best trades will be happy to know my weekend perusal of U.S. equities revealed a handful of candidates.
I’ve culled the list narrowing it down to three top picks. Today’s trio boasts strong trends, are under institutional accumulation, and perhaps most importantly, are flashing low-risk entries for the week ahead. That means the potential risk is small compared to the rewards in the offing.
Behold, three of the best trades on the Street.
3 of the Best Trades on the Street: Disney
Mickey kicks off this week’s selections with an attractive dip buy setup.
Recent news has lit a fire in Walt Disney Co (NYSE:DIS) volatility bringing outsized candlesticks and rapid-fire reversals. The silver lining is that option premiums are inflating like a balloon, which makes short premium strategies mighty tempting.
The six-week uptrend in DIS is still well-intact, despite last week’s retreat. In fact, the stock is now testing its rising 20-day moving average making this a logical spot to initiate new bullish trades.
If you think this dip gets bought like its predecessor, then sell the Jan $100/$97.50 bull put spread for 36 cents.
3 of the Best Trades on the Street: Microsoft
Our next selection hails from the tech sector. Microsoft Corporation (NASDAQ:MSFT) is on the verge of yet another in a long line of breakouts. What makes the MSFT setup particularly attractive is last week’s downside fakeout. On Dec. 4, the stock slipped below key support at $82 on heavy volume.
The magnitude of the descent likely shook out a broad swath of bulls, and it may have even snookered in some short sellers. With the sharp reversal higher, however, the breakdown was a ruse.
Shareholders that bailed are now looking on with regret and short-sellers are getting squeezed. And that sets up the potential for what could be an explosive breakout.
Watch for MSFT to break above $85, then sally forth with bullish trades. We like buying the Feb $85/$90 bull call spread for $1.75.
3 of the Best Trades on the Street: Carrizo Oil & Gas
For our final pick, we’re moving to the energy space. The oil price recovery is continuing and many energy stocks are setting up again. Chief among them is Carrizo Oil & Gas Inc (NASDAQ:CRZO). CRZO is a smaller-cap oil play with a lot of volatility. It’s already gained 84% since September!
The past month of consolidation allowed CRZO to work through overbought conditions. And now, it has a solid base to launch from for its next breakout. The line in the sand worth watching is $20.80.
Once we eclipse that level, bullish trades are worth a shot. Because of the cheap price tag and high volatility, we like selling puts.
Sell the Jan $17.50 puts for 50 cents.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.