After a quick flush at the open, U.S. stocks are trying to find their footing to start off the last full trading week of 2018. Investors are still holding out hope that equities can make one final push into year end, helping to alleviate some of the pain we’ve felt so far in the fourth quarter. With that in mind, let’s get a look at our top stock trades for Tuesday.
Top Stock Trades for Tomorrow #1: S&P 500
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Let’s look at the market as a whole, starting with the SPDR S&P 500 ETF (NYSEARCA:SPY). There still seems to be complacency in the market, meaning there’s more frustration than panic. Markets tend to correct through price or through time. Short of a capitulation selling event, it’s possible for stocks to continue bumping around in turbulent fashion until the market decides to rally again.
So what does that mean for traders? $280 is clearly resistance, but the SPY quietly took out its fourth-quarter lows on Monday. A puke down to the $254 level would have been ideal before bouncing higher. Now we’ll have to see if we can rebound or if those lows are in sight.
On a further rebound, failure to get through the $262.50 level could present bulls a big issue. This level has been critical support over the past two months, with the SPY spending very little time below it. The longer we stay below it now, the more likely it will become resistance.
That won’t bode well for bulls and will almost guarantee that we test some of the lower levels from last February. $262.50 just became that much important to watch.
Top Stock Trades for Tomorrow #2: Small Caps ETF
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A few months ago, the Russell 2000 ETF (NYSEARCA:IWM) showed signs of weakness before the overall market tumbled into free-fall. That’s why many traders are using it as a barometer for other stocks like the SPY.
In other words, we’re looking for the IWM to lead us higher just as it lead us lower. So what’s it saying?
Unlike the SPY, the IWM has already taken out its February low. If it can get and stay above $140, it has a chance to rally to $146. That may be a solid risk/reward setup for quick traders looking for a $6 profit.
I need to see how the IWM handles the $146 level. That will be a big tell going forward. If $146 acts as resistance, we could retest the recent lows. Above and $150 could be in the cards.
Top Stock Trades for Tomorrow #3: Financials
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Last week we took a look at a possible short setup in Bank of America (NYSE:BAC), as the Financial Select Sector SPDR Fund (NYSEARCA:XLF) has been incredibly week. Keep in mind the Fed will release its rate decision and signal its future rate plans this Wednesday. That’s sure to move this group (and the markets as a whole).
Still, the recent decline over the past week or so has been led by the financials. The ETF is mostly made up of low valuation, decent yielding stocks. In some cases, the story is troubled like with Goldman Sachs (NYSE:GS). In other cases though, names like Citigroup (NYSE:C), JPMorgan (NYSE:JPM) and BAC remain attractive.
It’d be great to see the XLF break out of this downward channel and rally back to the $26 to $26.50 level. Given the way it’s traded, I would expect this level to act as resistance. Still though, we’re talking about a notable $2 a share rally, or about 8%.
Top Stock Trades for Tomorrow #4: Amazon
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A tech stalwart, the rebound in Amazon (NASDAQ:AMZN) wasn’t that impressive on Monday. That was highlighted by its inability to hold its morning rebound off the lows.
Long traders may try their luck on AMZN closer to the $1,500 level. If it holds, look for a rebound up to resistance, which is at the 50-day and the 200-day moving averages. Above those marks and $1,750 resistance comes into play. Are you seeing how much resistance is on the charts now?
Should $1,500 support give way, the $1,430 lows are back on the table. Below that and $1,350 is possible.
Top Stock Trades for Tomorrow #5: Boeing
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Boeing (NYSE:BA) has seen better times, as the stock remains under pressure. However, it tends to get “panicky” when it falls below $315. That’s highlighted by the fall from $370 to $295 in just a few day last month.
Still, that doesn’t hide the fact that BA remains under pressure from the 21-day moving average and vicious downtrend resistance (black line). One of these two levels — $315 support or downtrend/21-day moving average resistance — needs to give way.
Below support and the November lows are on the table. Above resistance and $345 to $350 isn’t out of the question.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long JPM and AMZN.
