In the first full trading session after the Fed decided to raise rates, the action wasn’t as clear-cut as it seemed during the first hours of the day. Tech popped, while the overall market moved higher. However, some of the air came out of those gains as the day went on, as stocks ended higher but with less conviction than in morning trade. Here are our top stock trades going into the end of the week.
Top Stock Trades for Tomorrow #1: Bed Bath & Beyond (BBBY)
Bed Bath & Beyond (NYSE:BBBY) continued its terrible performance with an exclamation point on Thursday. Shares plunged more than 20% and are now down more than 40% from its January highs.
The stock is now down — gulp — 75% over the past three years, showing how poor of a performance it’s really been. Thursday’s drop may find support around this $14.75 to $15 area, but I don’t see much of a reason to bet on it. Not when you buy a handful of other stocks with much better setups anyway.
For those that have to play, make sure this channel support holds up. A break below could send it down to $12.50 or so before bottoming — not that it might not get there anyway.
On a rally, look for that mid-range trend line (blue line) to act as resistance.
Top Stock Trades for Tomorrow #2: Rite Aid
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Like BBBY, Rite Aid (NYSE:RAD) has had a tough journey over the past 36 months, dropping more than 81%.
On Thursday, the company reported an in-line earnings result and beat on revenue expectations, but turned in a mixed quarter after announcing a shakeup to its board of directors.
It’s left the stock down about 3% on the day and right near its lows. Investors shouldn’t go long this unless RAD can get above the 20-day moving average and downtrend resistance before possibly falling below the lows at $1.23. New lows and RAD stock has to reset.
A break below will put added pressure on RAD as it edges closer to the $1 mark.
Top Stock Trades for Tomorrow #3: ConAgra Brands
Before Thursday, ConAgra Brands (NYSE:CAG) was sporting healthy gains on the year. After it fell 9% Thursday though, it’s up just 2% for 2018.
That’s what happens when you miss on earnings and revenue estimates. Worse though, CAG stock blew through range support between $34 and $34.50. Bulls who want to go long need CAG to get back above this range and preferably that $34.50 mark. Realize that CAG may find this area as resistance now, so a rebound toward it should be viewed with skepticism until proven otherwise. This may also be a solid risk/reward for short-sellers.
On the downside, a retest of $32 to $32.50 is now in the cards, and if that fails, the $31.50 lows could be in target.
Top Stock Trades for Tomorrow #4: Netflix
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There’s reason to remain skeptical after Thursday’s less-than-convincing day of action. But it shows that the bulls aren’t completely rattled by the Fed’s announcement. Of course, window-dressing could be driving some of the action, particularly as names like Netflix (NASDAQ:NFLX) edge higher.
Up 80 basis points in the session and it was encouraging for NFLX bulls. What I liked the most? That Netflix put in a series of higher lows, continually bumping up against resistance near $370 to $375. This is exactly what we were looking for. With a push over on Wednesday, shares consolidated nicely on Thursday.
Now, we could get a push up to $390 to fill that gap. Above there and $400 is the next line in the sand. Short-term bulls can use Thursday’s low as their stop-loss. Conservative buyers looking for a dip can wait for a possible retest of uptrend support.
Top Stock Trades for Tomorrow #5: Johnson & Johnson
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After ending its partnership with Geron (NASDAQ:GERN), shares of Johnson & Johnson (NYSE:JNJ) fell, hit uptrend support and reversed higher. Although some of its gains evaporated late in the session (like Netflix), it was nothing like the 68% bloodbath that GERN investors absorbed during the day.
Maybe those investors can try to make back some of their losses in JNJ. After topping out near $143, JNJ shares have been in decline for several sessions. Now back above the 20-day moving average and near uptrend support, bulls can go long with a defined risk/reward.
I would target a $4 to $5 per share move, with the all-time highs near $145 being the target should JNJ maintain momentum. Investors can punch their stop-loss on a close below trend support and the 20-day moving average.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long JNJ.
