Many stocks used Wednesday as a day to consolidate, but some stocks posted big moves. Here are the stock trades for tomorrow catching our eye as we prepare for Thursday’s trading session.
Trades for Tomorrow: Square Stock
Square Inc (NYSE:SQ) is starting to feel its bullish mojo again, bursting higher by about 5% on Wednesday. That makes this call buyer happy, I’m sure, because as of Wednesday they still have a massive position.
Click to Enlarge
The pullback in February and in late March coincided with the declines in the broader market. However, its key trend-line of support (in black) held up well. As a result, SQ stock is moving higher and powerfully pushed through $50. There’s no guarantee it won’t fall back down to trend-line support in the upper-$40s, but the pieces are there for a rally to $57.50, its former highs. So bulls can look to buy tomorrow.
Trades for Tomorrow: Micron Stock
$50 was a key level in Micron Technology, Inc. (NASDAQ:MU) that many investors were watching. It looked like an obvious bounce trade in early April after a selloff from $62 despite strong earnings. The bounce played out early, sucking in new investors looking for a payout. The market (as if on queue) flushed out a number of traders by plunging MU stock down to $48, running stop-loss orders all along the way.
Click to Enlarge
What now? As you can see at the bottom of the chart (in yellow), momentum is starting to turn, favoring the bulls. Micron’s strong rally on Wednesday pushed the stock above $54, a critical move now that shares are above that level of resistance (blue line). The hope for bulls is that Micron stock is flat or higher on Thursday and eventually finds $54 as support rather than resistance.
Trades for Tomorrow: Chipotle Stock
In early Wednesday trading, we had high hopes that Chipotle Mexican Grill, Inc. (NYSE:CMG) stock was having one those “this is it” moments.
Click to Enlarge
On the chart above, $345 was momentary support back in August before acting as resistance through 2018. That looked like it was ending Wednesday, before CMG’s 5% gain evaporated to just a 1% gain. If Chipotle stock could have held those gains and cleared $350, there was nothing standing in the way (technically speaking) for a run to $400.
Investors should wait to see if CMG can clear this level. Note: Here’s how to play an earnings breakout in Chipotle.
Trades for Tomorrow: FedEx Stock
After reporting earnings back in March, FedEx Corporation (NYSE:FDX) was breaking out. However, that turned out to be a false breakout, as shown in purple below.
Click to Enlarge
Along with the rest of the market, FDX stock was promptly hammered lower until it found support $20 per share lower, around $235. It trapped longs (me included) who bought into the breakout of a company with strong fundamentals. Patience (and luck) are paying off though.
FDX stock is up almost 8% over the past five trading sessions and have clearly poked above $255 resistance. A run to $260 before consolidating and finding support at $255 would be ideal, paving the way for FedEx stock to retest its highs near $275. As our yellow circles also show, shares are not yet overbought and have momentum working in their favor.
Remember to go one step at a time, though. Our next step is to see $255 hold as support.
Trades for Tomorrow: Home Depot Stock
Like FedEx, Home Depot Inc (NYSE:HD) fell after it reported good earnings. After chopping around in the mid-$180s, many investors were convinced it would retest its highs just over $200. In fact, the average analyst price target is $209, roughly $4 per share above its current 52-week high.
Click to Enlarge
I like Home Depot’s chart because I like to keep things simple. $180 was support in February and resistance in March and April. Put simply: Above $180 was bullish, below was bearish.
Shares have chopped through the $170s for the last six weeks, consolidating nicely as noted by the super flat bottoming action in the MACD (yellow circle). Shares have momentum breaking their way and are far from overbought (blue circle). While Wednesday’s rally put HD back above its 50-day moving average, note that it’s still on shaky ground when it comes to $180.
A move above $180 would be highly encouraging and should HD push through $182.50, bulls would have a serious case for taking it higher. Especially as HD enters its spring selling season, Home Depot’s strongest quarter of the year.
Bulls should look for a break over $180 and consider using that level as a stop-loss should it happen. If bears are short, a close above this level would be my queue to book profits.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held a long position in HD, MU and FDX.
