Stocks were mostly flat on Friday, a day where banks kicked of earnings season. Let’s see where we are with our top stock trades ahead of a busy week.
Top Stock Trades for Monday #1: Johnson & Johnson (JNJ)
Investors in Johnson & Johnson (NYSE:JNJ) took its $4.69 billion settlement news pretty good, with shares falling a little more than 1% Friday.
Quietly, though, JNJ has been performing pretty good. The $120 level effectively held as support and shares are — fingers crossed! — holding up over downtrend resistance right now.
$127 was support through 2017, but hasn’t really played a role so far in 2018. It will be interesting to see if this level acts as resistance going forward. That’s assuming JNJ doesn’t fall back below its prior downtrend line.
Bulls need to see JNJ hold up on the backside of this prior trend-line and preferably get back above $127.
Top Stock Trades for Monday #2: Netflix (NFLX)
The performance from Netflix (NASDAQ:NFLX), has been jaw-dropping, as shares have soared more than 100% so far in 2018.
Beast Mode: [ON] OFF
Despite this, shares fell about 3.6% on Friday, ending the week with sort of a dud. Keep in mind though, the streaming giant will report earnings today after the close. It would have been easier if NFLX kept on rallying, honestly. Falling ahead of the print while still maintaining lofty gains makes it a bit trickier.
The results will no doubt be impressive. The question is, will they be good enough to justify bidding the stock up even higher? That’s hard to say. (Psst: here’s everything you need to know ahead of the report).
Shares have been following trend since January and if it breaks below this mark, it could enter a period of consolidation. The first level of support I would look for in that case would be the 50-day moving average. For now, resistance near $420 is pretty clear. If trend-line support holds up after earnings, bulls can justify a long position. They can also buy on a breakout over $420. I wouldn’t be in a rush to short this monster though.
Top Stock Trades for Monday #3: Amazon (AMZN)
I also wouldn’t be in a rush to short Amazon (NASDAQ:AMZN). Remember, we like to keep it simple — KISS. We’d much rather buy dips in strong stocks during bull markets. Unless it’s a cute short, we’re only going to sell weak companies with poor setups. We’re not shorting a raging bull, which is exactly what Amazon is as shares made another new all-time high Friday.
That said, I’m not really in a hurry to buy Amazon either. Shares are up more than $100 in the last few sessions and have an RSI north of 70. The RSI isn’t a reason to sell a stock necessarily, but it can keep us out of a name until it cools down. With Prime Day starting on Monday, I also don’t want to pile into AMZN, which could setup as a sell-the-news event.
We nailed the move in AMZN a few weeks ago with an attractive risk/reward. Buying now is doing so with a less attractive setup.
Top Stock Trades for Monday #4: Cisco (CSCO)
Cisco Systems (NASDAQ:CSCO) made a great bounce off trend-line support. However, it would look a lot more attractive over $42.
Again, the bounce is good for bulls, but outside of its recent range with downtrend resistance (pink line) in play, it looks a little iffy. Below trend-line support and the 200-day moving average is the next stop.
Keep it simple, stupid (KISS).
Top Stock Trades for Monday #5: Disney (DIS)
Walt Disney (NYSE:DIS) could trigger a big-time breakout if it gets above this $112 area with authority. The only problem? This resistance line has been in place for three years and has kept DIS in check for quite some time.
Still, though, the long-term chart shows a series of higher lows, as Disney has slowly but surely climbed. Eventually one of these levels will give way, either support or resistance.
It doesn’t have to happen now. DIS could easily test resistance, fail and fall back to its cluster of major moving averages near $103. With an RSI over 70 and notable resistance nearby, I’m not in a rush to buy the stock. I’d rather buy a definitive breakout or consider DIS on a pullback.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long JNJ.
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