While the recent selloff hasn’t been that brutal — like February’s 10% beatdown in 10 days — it was nice to see stocks finally climb higher on Friday. The Dow Jones snapped an eight-session losing streak, but the losses have broken a lot of setups. In that regard, here are the top stock trades we found for Monday.
Top Stock Trades for Monday#1: BlackBerry (BB)
On Friday before the open, BlackBerry (NYSE:BB) delivered a top and bottom line earnings beat. In pre-market trading, this pushed shares higher by more than 4%. In the regular session though, shares tumbled more than 10% at one point.
The move plunged BB stock below key support. Downtrend resistance began in January, and it took until June for BB to break over it. It was retesting the backside of that level (usually exactly what we want!) but ultimately failed as investors dumped the stock on earnings.
Now what? We’ll have to see whether $10 holds as support and whether BB can push through this downtrend of resistance again.
Top Stock Trades for Monday #2: Tesla (TSLA)
Tesla (NASDAQ:TSLA) isn’t going into the weekend making bulls feel very confident. After short-squeezing its way from $275 to $375 in just a few weeks, shares are teetering on a vital level.
Breaking over this $330 to $340 level fueled a big run over $360. This was an important level, but it couldn’t hold as support after such a big run and given the weakness in the overall market.
Now bulls need to see this $335-ish level hold up. If not, the $300 to $310 level is back in play. While it’s positive for Tesla to have all three of its major moving averages below it, the stock tends to trade very technically. That’s why investors should pay attention to the charts and it’s why $330 to $340 needs to hold up.
Top Stock Trades for Monday #3: Red Hat (RHT)
While Red Hat (NYSE:RHT) beat on earnings and revenue expectations, guidance came up short. Wall Street reacted by dropping the stock 12% Friday and nailing a number of other cloud stocks too.
Remember our strategy on Adobe (NASDAQ:ADBE) as well as our plan for Salesforce (NASDAQ:CRM) — two cloud-king leaders.
In any regard, RHT was smashed on Friday and blew right through its 50-day and 100-day moving averages. RHT had been in a very solid uptrend over the past 18 months, so Friday’s selloff is noteworthy.
Is the uptrend over or is this a silver-spoon buying opportunity? That much — unfortunately — isn’t clear. At least from a trading perspective. Aggressive bulls can buy near $145 and use Friday’s low as their stop-loss. Others may consider waiting to see if RHT tests its 200-day moving average and buying there.
Some may simply prefer to buy the stocks that aren’t getting creamed and waiting for better setups in them, like CRM and ADBE.
Top Stock Trades for Tomorrow #4: Caterpillar (CAT)
The Dow’s been under a ton of pressure and Caterpillar (NYSE:CAT) hasn’t helped matters.
The chart here is pretty simple: $140 needs to hold for bulls or CAT could be in trouble. Those looking to take a position may want to do so here, though.
It’s a low-risk/high-reward setup. Meaning that, on a notable close below $140, investors can cut their minimal losses and move on. Should it rebound, it could work its way back up to $160 or higher.
Note that all three major moving averages sit above CAT presently, which could make upside more of a slow grind than a quick pop.
Top Stock Trades for Tomorrow #5: Huya (HUYA)
The red-hot Chinese stocks have been hammered over the past few trading sessions and Huya (NYSE:HUYA) is no exception. We outlined the plan for iQiyi (NASDAQ:IQ) earlier this week and it’s been playing out well. So what’s the plan on Huya?
The company reported a pretty impressive earnings result earlier this month, part of which has fueled its massive run over the past few weeks.
Since IQ, HUYA and some of these other stocks are recent IPOs, we don’t have many trend lines to go off of. But we can use Fibonacci levels to help. Like IQ, HUYA tends to rally, consolidate and rally again. That can be seen (in thin black lines) on the chart above.
Currently, shares are pulling back to the most recent consolidation point and its first retracement level (38.2%). Let’s see how it handles this level or whether more downside comes into play. If so, look for possible support near the 50% and 61.8% retracement levels, respectively.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long CRM.
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