The markets were quiet up until the Federal Reserve announced another hike in interest rates. Of course, that got things moving a bit as investors have been waiting all week to see what the Fed would do. The market’s reaction still isn’t that clear though and it will likely take a few more days to figure out where it will go. In the meantime, let’s look at our top stock trades.
Top Stock Trades for Tomorrow No. 1: S&P 500 ETF (SPY)
Of course, given the news it makes sense to start with the SPDR S&P 500 ETF Trust (NYSEARCA:SPY).
Again, there’s always a few fake-outs and knee-jerk reactions to the FOMC announcement. But here’s an early look at the SPY so far.
I actually like how the SPY is coiling between this $278 and $280 level, as it’s digesting the breakout over downtrend resistance in May. For the SPY to hold the $278 level is very constructive, given the FOMC announcement today.
If it fails, perhaps the $274 level or the $270 to $272 area is due for a visit. But I’d much rather see a close above $280 this week. Should it happen, new highs over $286 are on the table.
Top Stock Trades for Tomorrow No. 2: Bank of America (BAC)
Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co (NYSE:JPM), Goldman Sachs Group Inc (NYSE:GS) and other big banks are immediate trades stemming from the Fed because they are effected so much by interest rates.
In short, rising rates in a strong economy bode well for the banks and their bottom line.
Focusing specifically on BAC stock, bulls are close to a potential breakout. Just near $30.30, downtrend resistance has kept BAC in check since March. A breakout over this level should give BAC enough energy to run to the $31 to $31.50 level. From there, we can re-evaluate the stock.
Should resistance hold and BAC stock fall, look for support around $29.
Top Stock Trades for Tomorrow No. 3: Alphabet (GOOGL)
We were buyers of Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) at $1,000 and told short-term traders there was downtrend resistance coming into play between $1,130 and $1,150.
With impressive strength, GOOGL stock powered through that level. But something even better happened. It came back and retested the backside of that downtrend mark and it held. That is such a great setup, which is why I love breakout-and-pullback setups when the pullback finds support at prior resistance.
For Google stock, that downtrend line is traders’ new support level. Above that $1,150 to $1,160 area and GOOGL’s prior highs near $1,200 are back in target.
Top Stock Trades for Tomorrow No. 4: Overstock (OSTK)
Overstock.com Inc (NASDAQ:OSTK) isn’t a name I trade too often. In fact, someone actually pointed it out to me on Twitter Inc (NYSE:TWTR) and I have to admit, it looks good.
Over the last two days, OSTK has powered over both its 50-day moving average and downtrend resistance. The latter of the two has been weighing on shares all year long.
Now above this level, it’s key for two things to happen. First, the backside of this level (like GOOGL did) must hold as support. Second, bulls need to see OSTK breakout over $40.
Should it do so, a run up to its 200-day and 100-day moving averages at $46.50 is in the cards.
Top Stock Trades for Tomorrow No. 5: Netflix (NFLX)
It’s no wonder Netflix, Inc. (NASDAQ:NFLX) was in rally mode Wednesday, up about 5% after Goldman Sachs analysts slapped a $490 price target on the name. Yes, the same stock that now has a larger market cap than Walt Disney Co (NYSE:DIS) and is up almost 100% so far this year.
So what should we do with NFLX stock now?
This stock has been a total monster and it has done nothing but smash through barrier after barrier. Let this be a lesson on why you don’t short stocks simply because they’ve had a big run. NFLX very well could have cleaned out a short-seller who took too big of a position.
In any regard, I don’t know that there’s anything to do at the moment. Shares are becoming overbought, which over the past few months generally means upside is limited in NFLX. The RSI (blue circles) could rise a bit further, but north of 80 and it tends to coincide with a pullback in NFLX.
I’m not trying to call any tops here. Instead, I’d rather buy NFLX on a pullback. At the moment, I’d prefer to do that near $350-ish, although that level will gravitate higher the longer NFLX stays elevated.
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.
