After Tuesday’s reasonable “turnaround,” investors took the full brunt of selling pain on Wednesday, with major indices falling about 1%. Chinese stocks remain under pressure and a big cannabis deal took place. Let’s look at our top stock trades.
Top Stock Trades #1: Alibaba (BABA)
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It’s been tough sledding for Alibaba (NYSE:BABA) and quite frankly, the rest of the U.S.-traded Chinese stocks. Be it JD.com (NASDAQ:JD), Huya (NYSE:HUYA), iQiyi (NASDAQ:IQ), Baidu (NASDAQ:BIDU) and many others. It’s been bad.
Trading at less than 28 times earnings, with nearly 60% revenue growth this year and +20% earnings growth, Alibaba is one of the strongest Chinese tech stocks around.
It’s also nearing long-term support near $165 and that sets traders up with a great risk/reward. If they buy BABA near current levels and $165 fails, they can bail. If it holds, a rebound into the low- to mid-$170s should be in the cards.
Top Stock Trades #2: Macy’s (M)
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Despite a top- and bottom-line earnings beat at Macy’s (NYSE:M), shares fell hard on the day, dropping more than 14%.
Aggressive traders have a setup though. Macy’s stock has tended to trade in a range, before breaking higher. On the chart, that can be seen by a series of blue rectangles. While the base of this rectangle is certainly lower, $35 has proven to be solid support in the past.
It’s also where the 100-day moving average comes into play. Should it fail, the prior range ($27 to $32) could be in play, as could the 200-day moving average near $29.50.
Top Stock Trades #3 and #4: Constellation Brands (STZ) and Canopy Growth (CGC)
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Is Constellation Brands (NYSE:STZ) the new go-to pot stock? I don’t know if I would say that, but it’s $4 billion investment in Canopy Growth (NYSE:CGC) certainly shows promise in the latter.
Constellation CEO Rob Sands calls CGC its “exclusive global cannabis partner,” another ringing endorsement.
Anyhow, the move clobbered STZ, which fell more than 8% at one point on the day and launched CGC, up more than 30%. As seen above, it put STZ into critical support, which InvestorPlace buyers surely bought because we called out this level about a six weeks ago and said to keep it on watch.
As for CGC, seen below, it put shares right into resistance. A close over $36 could be bought by momentum traders.
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Earlier this month, Micron (NASDAQ:MU) broke below key uptrend support. That’s after topping near $62 and hitting downtrend resistance multiple times since May.
Sheesh, it doesn’t look good. Wednesday’s 6% plunge put Micron below its 200-day moving average as well. From a bullish standpoint, MU is looking broken at the moment.
Bulls who still like it can consider a long into this $44 to $46-ish area of support. But I find Micron more attractive when it’s sailing with the wind at its back — not through a monsoon.
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.
