With the 10-year Treasury yield eclipsing 3%, U.S. stock markets are under pressure Tuesday. The declines shouldn’t be too surprising though, as the market has been pretty hot over the past eight trading sessions. Here’s a look at our top stock trades for Wednesday.
Top Stock Trades for Tomorrow #1: Chipotle (CMG)
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While Chipotle Mexican Grill, Inc. (NYSE:CMG) gave up a majority of its early morning gains in afternoon trading, it’s always nice to see a stock outperform on days where the market is down.
Shares have been consolidating nicely near $425 and generally speaking, the charts look bullish so long as CMG stays above $400. If support stays true, a run to $475 seems possible.
This one has a 15% short interest, so any upside momentum could get a short-squeeze going. I wouldn’t want to be short CMG at this point, even though a drop to $400 could be in the cards and still keep the bullish trade intact. The reason? If it hasn’t fallen yet, I don’t want to risk sticking around too long (on the short side) to see if it will.
Top Stock Trades for Tomorrow #2: Home Depot (HD)
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In other words, its longer-term catalysts should continue to play out. So what do the charts say?
Over $180 was a bullish development and HD’s ability to stay above the 100-day moving average also inspires some confidence. The bullish story changes if HD falls below trend-line support though. I would look to buy HD stock on a pullback rather than try to short it at this point.
Top Stock Trades for Tomorrow #3: Gold (GLD)
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What’s happening to gold? Well, the doesn’t like higher rates or a stronger dollar either.
The plunge in the SPDR Gold Trust ETF (NYSEARCA:GLD) puts it below the 200-day moving average and below what had become meaningful support between $123 and $124.
Hopefully a wave of support comes into play around $120 or so. Either way, GLD is not in a spot I’m dying to invest in on the long side. Bears can stay short and use a close above the 200-day moving average as their stop-loss. See the short-term daily chart above and the long-term weekly below for potential support levels.
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Top Stock Trades for Tomorrow #4: Vipshop (VIPS)
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Vipshop Holdings Ltd – ADR (NYSE:VIPS) is taking a beating Tuesday, down 20% after reporting earnings.
Now below all three major moving averages, VIPS is sort of in no man’s land at the moment. Maybe support will come into play near its December gap-up at $11.50, but I don’t want to risk my hard-earned dollars to find out.
If anything, the $10 to $10.50 area gives bulls a much better risk/reward, as this area has been significant over the past few years. Bears who want a piece of the action despite missing out on a 20% fall can consider using the 200-day moving average as their stop-loss.
Top Stock Trades for Tomorrow #5: Alibaba (BABA)
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Alibaba Group Holding Ltd (NYSE:BABA) finally snapped out of its lull this month, rocketing up to $200. Shares are up about 10% this month, but face a new hurdle.
BABA has quickly failed at $200 a few times this month. In fact, $200 has been resistance all year for the Chinese e-commerce giant. But there is a positive to all of this as $192.50 has been support.
If $192.50 can hold, it should allow BABA to charge up the necessary energy to retest and eventually break through $200. Nimble bulls can buy the pullbacks into support, while momentum traders can buy the breakout on a close over $200.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
