Small caps remained under pressure on Tuesday, falling about 1%, while large cap stocks continued to grind higher. That’s apparent as the Dow Jones hit a new high on Tuesday. Conveniently, the index is the first name on our top trades list.
Top Trades for Tomorrow #1: Dow ETF
Yesterday, we highlighted the collapse in the iShares Russell 2000 ETF (NYSEARCA:IWM). It could setup as a perfect buy should it decline just a little bit further. However, it’s the complete opposite situation for the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA), which hit a new all-time high Tuesday.
Hopefully no one is long Russell and short the Dow.
The DIA was massively overbought throughout the entire fourth quarter of 2017, shown in the chart with blue oval circling the RSI measurement. It took a long time to work that condition off.
Since July though, the DIA has been in a sharp uptrend (blue line) and I wouldn’t expect that to last forever. Should the DIA take a rest, look for support between $260 and $262. That’s where the 50-day moving average will likely come into play, as well as prior breakout support.
On the upside, look for the 20-day and uptrend support to continue guiding the DIA higher until it no longer does. Keep it simple.
Top Trades for Tomorrow #2: PepsiCo
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Shares of PepsiCo (NYSE:PEP) dipped less than 2% after the company beat on earnings and revenue expectations but altered its full-year guidance.
Above is a five-year weekly chart of PEP, which is breaking below its 75-week moving average. This level has been solid support over the last few years. Below it now, we open up the possibility of a test with the 200-week moving average.
Helping to pressure PEP stock is the series of lower highs the stock registered this summer, emphasized by the blue line on the chart. That could help push Pepsi down to the $102.50-ish area, where it will likely find level support No. 1 and run into the 200-week moving average.
Below that and the 2018 lows near $95 are back in sight.
Top Trades for Tomorrow #3: Stitch Fix
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Stitch Fix (NASDAQ:SFIX) investors can only wish the stock was down about 2% on earnings like PepsiCo. Instead shares are cratering more than 35% after an in-line earnings result and a miss on revenue estimates.
Wall Street clearly isn’t pleased with the results, as SFIX is plunging on the day. Shares gapped below the 50-day and knifed right through the 100-day moving average. I would let this one settle down for a few days before trying to trade it.
Maybe $26 becomes support or perhaps the 200-day stabilizes the name near $27. Either way, wait for those prices to have a better risk/reward setup. Below that, and SFIX could work its way down to prior range support near $19.
Top Trades for Tomorrow #4: BlackBerry
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What a reversal we’ve seen. Last Friday, shares of BlackBerry (NYSE:BB) erupted higher on earnings, tagging $12 and began retreating. However, above downtrend resistance and just over the 200-day moving average, and BB still looked okay.
BB stock must have done too much partying this weekend. On Monday, BlackBerry stock puked and on Tuesday it still looks hungover. Now near $10.50, the question is whether it can stabilize. It has the 20-day and 50-day moving averages just below current levels, as well as the key $10.25 mark.
Aggressive bulls could justify a new long position in BB stock with a stop just below this $10.25 mark on a closing basis.
Top Trades for Tomorrow #5: PayChex
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Unlike all the other earnings losers, PayChex (NASDAQ:PAYX) stock is actually up more than 2% after beating on earnings and revenue expectations.
Despite the wide range on Tuesday, it looks like PAYX will remain in a rising channel (blue lines). Keep it simple. Over $75 and bulls can stay long. Investors can continue to trade it along channel support and resistance as well.
Also recall that InvestorPlace contributor Josh Enomoto called PAYX one of The 8 Best Cash Cow Stocks to Buy for Stable Returns.
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.
