Stock market indices are quietly grinding out new highs or are on the cusp of making new highs, as we enter the summer trading season of August. That means a lot of potential frustrations for traders in the form of “melt-ups,” chopping price action or sudden free-falls. We don’t yet know what it will be or how that will impact our top stock trades going forward.
Top Stock Trades for Tomorrow #1: Tesla (TSLA)
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A report that the Saudi Wealth Fund took a $2 billion stake in Tesla (NASDAQ:TSLA) got shares moving higher Tuesday, up about 4%. They then went up more than 7% for the day and were halted once CEO Elon Musk tweeted that he may take the company private at $420 per share.
What has that done to the charts?
It propelled Tesla stock over $360 per share, a key level in my mind for short sellers. This level has been big-time resistance in the past, even though Tesla temporarily breached this mark in June.
Over this level though and the all-time highs near $390 are in sight. If Tesla stock is able to gravitate toward the level, I’d be willing to bet a lot of shorts have their stops placed between there and $400.
Remember, both longs and shorts tend to park stops at obvious intersections — be it key levels, big moving averages and prior highs or lows. Also remember that almost 30% of the float is sold short in Tesla. If a rally persists, shorts may have no choice but to throw in the towel, driving up shares as they are forced to buy-to-cover.
Keep an eye on $360. Above it is bad for shorts. (Note: 7 Auto Stocks to Buy).
Top Stock Trades for Tomorrow #2: Disney (DIS)
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Walt Disney Co (NYSE:DIS) is set to report earnings on Tuesday after the close. By the way, here are three things investors should keep their eye on in the report.
Above we have a five-year weekly chart of Disney. Shares have been slowly working higher and finally pushed through downtrend resistance near $111. This isn’t a call on whether to buy or sell Disney ahead of the report. It’s to know the levels afterwards.
If Disney pulls back on earnings, see if the backside of this prior downtrend line holds up. I would consider Disney a buy if it does. If this fails as support, DIS might be heading back to its prior range. Over the highs (dashed line) and Disney shares can head for a multi-year rally like it hasn’t seen in quite some time.
Top Stock Trades for Tomorrow #3: Twilio (TWLO)
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Long-term investors were happy with the performance with Twilio (NYSE:TWLO) this year, up more than 160% and finally back toward those post-IPO highs. However, TWLO is finally making new all-time highs after rallying 20% on Tuesday following earnings. The move is sending its year-to-date gains to more than 220%. What now?
As highlighted by the pink circles, TWLO has a tendency to rally and consolidate/pullback before rally to new highs. With an again-elevated RSI, that pattern could be in the cards once more. With that in mind, there are two levels I’d like to keep an eye on. The first one is Tuesday’s low just below $72. Fittingly, this was roughly the all-time high a few years ago as well.
Short-term buyers can use a close below that mark as their stop-loss. Conservative buyers can wait for a pullback into trend-line support, which will likely be in the mid- to upper-$60s.
Top Stock Trades for Tomorrow #4: Nvidia (NVDA)
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$255 has kept a lid on Nvidia (NASDAQ:NVDA). With shares now over that mark, could they be making a move higher into earnings? Nvidia reports on August 16th, which gives it more than enough time to rally into the print. I would selfishly prefer a decline into earnings, as it sets up a great buying opportunity ahead of the report.
In any regard, the $255 is a rough estimate, but short-term traders can reference that level on whether to be long or short/neutral. Should it rally, I would look for Nvidia to run into channel resistance up near $270, which conveniently, is also where the all-time high currently rests. For the record, a strong name like NVDA is not one I would be short.
Top Stock Trades for Tomorrow #5: Foot Locker (FL)
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Holding up over $47, Foot Locker (NYSE:FL) has all but filled the gap from its big rally in May.
Bulls who want to go long FL can do so as long as shares hold up over the gap. Below this mark and the 200-day moving average is in the cards. Below the 200-day and investors need to use caution, as the $40 level is likely on the table.
Upside might be tough, though. First there’s the 100-day moving average just ahead, while the 20-day is descending, near $50 and just below stiff downtrend resistance. Conservative bulls can buy FL stock on a close over $50 instead, if current levels seem too risky.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long NVDA.
