On Wednesday, the Federal Reserve announced that it is raising interest rates once again. However, they sent somewhat mixed signals. While raising rates now, they telegraphed to the market that it would not raise too aggressively going forward. So far, bulls are okay with the move, although we’ll get a better feel for investors’ real feelings through the rest of the week. Here are our top stock trades in response.
Top Stock Trades for Tomorrow #1: S&P 500
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Let’s look at the main U.S. equities index using the SPDR S&P 500 ETF (NYSEARCA:SPY).
After taking a few months to gather itself following the massive February crash, the SPY has been trading quite well. Volatility remains extremely low as the ETF continues to grind higher.
A break below this $289 to $290 level may signal that, at least in the short-term, the rally is over. If it’s able to hold this $290 level and rally, a push to ~$300 may be in the cards.
Should it fail, a decline to the $285 level and/or the 50-day moving average could be in the cards.
Top Stock Trades for Tomorrow #2: Nasdaq ETF
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A look at tech shows an even more bullish picture as the PowerShares QQQ ETF (NASDAQ:QQQ) has been powering higher as well. That’s as names like Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and other drag the sector higher.
A pullback to $170 would be a great buying point, although other support levels will surely come into play before this 8% drawdown takes effect. For now, the 20-day and 50-day moving averages continue to act as support, while the QQQ has been in a solid uptrend since June.
The downside? That the QQQ has been lacking momentum this month and if it loses the 50-day, the 100-day and possibly the $175 level would be the next line in the sand.
The upside? Should the QQQ give its recent highs another test and break over this mark, it’s got plenty of upside potential before running into channel resistance. See how it trades this week and we’ll get an idea on how the market feels about the rate hikes.
Top Stock Trades for Tomorrow #3: Semiconductors
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We’ll get to some individual names after this, but one big driver to the QQQ will be the semiconductor stocks. That’s in addition to some of the big tech names listed above.
For this, we’ll look at the Market Vectors Semiconductor ETF (NYSEARCA:SMH), which continues to coil right in front of our eyes. This indecisive action can be seen perfectly in a name like Nvidia, by the way.
Following a series higher lows and lower highs, the SMH is setting up for a big move in one direction or the other. Now below the 20-day and 50-day moving averages, the SMH has to clear these two levels before it can retest downtrend resistance near $108-ish.
Just below current levels is the 200-day. Losing this level puts it at the bottom of the coil, near channel support. Losing this level — especially amid a market-wide pullback — could flush the SMH down to the mid-$90s, where it’s found support a few times now.
Top Stock Trades for Tomorrow #4: Tesla
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Just when it looks like Tesla (NASDAQ:TSLA) is down, it always proves it’s never out. We zoomed out for this chart, showing a two-year look at Tesla.
Shares put in a higher low on the bottom of its long-term range, allowing a gentle uptrend to form (blue line). Its main range is between $270 and $360, with extremes to $390 on the upside and $250 on the downside.
It’s quickly pushed through $300 to $310, a key level that’s been both support and resistance in the past. However, the move from $310 to $320 is going to be tough, with both the 50-day and 200-day moving averages in the area, along with a prior downtrend line (purple line).
Should it get through, the $360 retest is back on the table and bulls will be in control.
Top Stock Trades for Tomorrow #5: J.M. Smucker
Each big rally fizzles out faster and faster for J.M. Smucker (NYSE:SJM). That may make it tough for investors to buy should it retest support near $100.
Ultimately, shares have broken down to ~$95 a few times, but by and large, SJM has spent very little time at or below $100 over the past few years. With a big yield and low valuation (although struggling for growth), it’s understandable to see why.
If nearby support doesn’t hold up, look for that $95 to $100 retest. If support holds up and SJM can push through downtrend resistance near $110 as well as the 50-day moving average, bulls can be buyers as well.
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.
