The Monday trading session comes on Christmas Eve, meaning it will be a shortened trading session. With the markets closed on Tuesday, that’s a lot of risk for an investor to assume by buying on Friday.
Essentially, they will have no liquidity. Why would they want to do that? As a result, we’re seeing yet another bludgeoning in the stock market. Let’s look at some top stock trades for Monday.
Keep in mind Friday is a quadruple witching day, one of four in the year. It’s where a bevy of futures and options contracts expire, dumping extra volatility into the market.
Russell 2000 ETF (IWM)
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But what clues does the Russell 2000 ETF (NYSEARCA:IWM) hold? I have kept a close eye on this, as it has been a leader to the upside and the downside. The ETF’s willingness to break down so quickly from support is definitely alarming. Where are the buyers?
We’ve got guys on the floor saying there’s no liquidity but let’s be real, it’s highly abnormal to see the S&P 500, Nasdaq, Dow and Russell down between 12% and 15% for the month of December.
It’s been a one-sided wrecking ball. Eventually, we’ll snap back, but the question is when. The IWM didn’t even slow its descent on Friday as it smoked right through the 200-week moving average. Does that put $120 to $122 on the radar? You bet it’s possible.
If we get a violent move down to this into year-end, look for some capitulation to signal a potential bottom. On some relief, look for a move back to the $140 to $145 level.
Netflix (NFLX)
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Down 5% on Friday, shares are making new lows this month. Hopefully, InvestorPlace readers were on the short-trade, riding this lower into the $250 level.
Provided that this level fails, a drop down to the $200 to $220 level is possible.
If we get a bounce in NFLX, look to see how it handles downtrend resistance.
Alphabet (GOOG)
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Below this key mark and GOOGL stock is losing a a big support mark. That said, these overshoots of $1,000 have typically been bought with a vengeance over the past year.
For long-term buyers, they know they’re getting a stock with a reasonable valuation, great growth and a very impressive balance sheet. In fact, it has one of the strongest balance sheets.
That said, short-term bears have a valid limited-risk short setup with GOOGL below $1,000 and downtrend resistance.
However, it’s my opinion that there are far worse companies that are better shorts than GOOGL at $1,000. I’d rather be a long-term buyer of this one.
Tesla (TSLA)
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Short-term bulls may consider a long position with a stop-loss on a close below $300. I don’t want to be a seller of Tesla, one of the few names that have held up in the selling, as it’s sitting on support.
Nike (NKE)
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On Thursday, we saw a false breakdown in Nike and quite a rebound on Friday. At one point up about 10%, shares are still clinging to gains of close to 8%. However, it’s running right into downtrend resistance, as well as the 50-day and 200-day moving averages.
What do you do if you missed the initial move? I’d either way for a pullback into $68 to $70 support or short Nike on a slight rally into the $74 level. Bears have a solid risk/reward with so much resistance overhead. A close above that resistance can be used as the stop-loss.
Why not buy a possible breakout over resistance? I would only do that if the market was bouncing alongside Nike. And only as a trade. Typically, breakouts don’t work out very well in these types of markets.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long GOOGL.
