The midterms are over and it’s back to our regularly scheduled rally? That’s what it seems like as U.S. equities galloped higher a day after Democrats took control of the House and Republicans held onto control of the Senate. In that light, let’s get a look at our top stock trades.
Top Stock Trades for Tomorrow #1: Amazon
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Bursting higher by more than $100 a share, Amazon (NASDAQ:AMZN) rose more than 6% Wednesday. That’s no small move for such a large stock.
In any regard, the rally was quite powerful as Amazon burst over short-term downtrend resistance (blue line) and the 200-day moving average. It also put the stock over an important level near $1,700.
Shares easily could have rallied just a couple of percent, leaving many to question whether the move would result in a breakout or a breakdown. But with Wednesday’s powerful rally, investors have a solid risk/reward.
Specifically, below $1,681 and bulls may want to consider parting ways with Amazon. Above and we can see a move to the $1,830 to $1,850 area.
Top Stock Trades for Tomorrow #2: Etsy
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Amazon wasn’t the only big mover in tech, as Etsy (NASDAQ:ETSY) ripped higher by more than 25% after beating on earnings and revenue expectations.
For the most part, $40 held as support and Etsy’s powerful move put the stock over the 50-day and 100-day moving averages. However, will the stock run into resistance between $50 and $52?
It’s not something I want to risk my investment dollars on to find out. As good as the quarter may have been, I need to see some more price action. While I wouldn’t short Etsy on the move, I either want to wait for a close over resistance or a pullback into support.
Let’s see which one we get.
Top Stock Trades for Tomorrow #3: Zillow
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On the flip side we have Zillow (NASDAQ:Z), which tanked 25% after missing revenue expectations and providing disappointing guidance.
Had the barrage of selling ended between $32 and $33, perhaps bulls could make a case. But after knifing right this area, we need to see where Zillow shakes out. If it closes below this mark on the weekly chart, I’m not sure where support will come into play just yet.
It could setup as a short on a retest of this area down the road, but let’s see where Zillow settles down. I don’t want to get ahead of our skis.
Top Stock Trades for Tomorrow #4: Twilio
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Six sessions ago, Twilio (NYSE:TWLO) gapped above downtrend resistance (purple line) and the 100-day moving average. That got a number of bulls on the train, some of which remained on board for earnings.
Well, they’ve got smiles on their faces after Twilio’s 35% rip-roaring rally on Wednesday. It’s got many wondering if they’ve now missed the boat.
With just a $7.3 billion market cap, they may not have missed the boat completely, but hesitant bulls really missed a chance to load up during October’s correction. Shares are hitting new all-time highs, but could find some resistance near $100 as it nears the backside of prior uptrend support.
If it can clear this mark, it’s got plenty of room overhead. Below and the first spot bulls will want to dip their toes in the water comes at $90.
Top Stock Trades for Tomorrow #5: Coca-Cola
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The 50 basis-point rally in Coca-Cola (NYSE:KO) may sound like small potatoes next to the 20% and 30% moves we just discussed. But with Wednesday’s rally, KO is making new all-time highs.
KO isn’t a trading stock and for many, it’s a long-term holding. But after such a large move, I’d be tempted to book some profits or at the very least, sell some upside calls if I own enough stock.
The reason being, if we get a selloff, KO will likely give up some of these gains due to its short-term overbought condition. If we get a decent rebound in equity markets, high-quality stocks that suffered big losses will likely outperform KO into year end. This may cause investors to rotate out of KO and into these names.
Of course, long-term investors don’t have to do anything if they don’t want to. It just helps to have options.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long AMZN.
