Stocks ended this choppy week with a slight rally on Friday, as trade talks continue to produce positive signs of progress. The day was highlighted by a major IPO, which is our first stock on the list. Let’s get started on our top stock trades.
Top Stock Trades for Tomorrow #1: Lyft
After pricing its IPO at $72, Lyft (NASDAQ:LYFT) opened for trading north of $87 and promptly pulled back in afternoon trading.
Now what? Those who want to trade Lyft need to see it build a range. At the very least, we should give it a day. They did a pretty good job pricing this one, even though the name is richly valued. That said, it’s also in high demand.
On a rebound, look to see how Lyft handles its opening level print and its highs near $88.60. Those who go long on day 1 or day 2, watch the IPO-day range lows. Should Lyft lose those lows and fail to recapture them, lower prices could be on the way before another rally.
I doubt Lyft has put in a short-term high given the demand for this one, but see how it handles it IPO day range if you choose to proceed.
Top Stock Trades for Tomorrow #2: Restoration Hardware
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Restoration Hardware (NYSE:RH) beat earnings estimates, missed on revenue estimates and trimmed its full-year outlook. As a result, this volatile stock is down more than 21% on the day.
The decline puts RH stock right near the key $104 level. A close below this mark and failure to recapture it on Monday spells trouble for Restoration. If that’s the case, it could easily send RH below $100 and possibly below $90 if the selling picks up pace.
As if $104 weren’t significant enough on the chart, the 18-month 61.8% Fibonacci retracement is around $105. Let’s see how this one shakes out on Monday and possibly Tuesday. If it can’t hold $104, bears can inflict more pain.
Top Stock Trades for Tomorrow #3: Wells Fargo
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Wells Fargo (NYSE:WFC) CEO Tim Sloan announced his retirement, sending shares lower by 2.2% on Friday.
The overall trend for banks hasn’t been great since their failed breakout earlier this month, but that’s even more true for WFC. This stock has had serious trouble garnering much upside, trending lower over the past 18 months.
Now what? If investors are attracted to its low valuation and 3.7% dividend yield, they can continue to hold Wells Fargo. That said, they may want other stocks in the sector if they’re drawn to the banks. Names like JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC) have struggled too, but overall, are performing much better.
On the charts, I would want to see WFC over $50, as well as the 20-day and 50-day moving averages before going long. Below this $47.50 to $48 area and $45 is on the table. So far, the trend remains lower.
Top Stock Trades for Tomorrow #4: Celgene
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Celgene (NASDAQ:CELG) was in the news Friday, as it appears more likely it will gain shareholder support next month in its acquisition by Bristol-Myers Squibb (NYSE:BMY).
The stock is up 7.5% on the news, but should the deal go through at current levels, there’s not a ton of upside left. The merger calls for Celgene to be acquired for $50 per share in cash and one share of BMY for each share of CELG. At current prices, that values the deal at roughly $97.22. That leaves about 3.2% upside left, not including the potential $9 per share payout should certain milestones be met.
The risk/reward made sense in the mid-$80s, but not as much here at $94. The only way it makes sense is if those milestones are met and right now, we don’t have any way of knowing that they will.
Top Stock Trades for Tomorrow #5: Bristol-Myers
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Speaking of Bristol-Myers, let’s look at its chart too. This is a five-year weekly look, with $46 being the notable level. I don’t know what will happen to BMY assuming the deal gets shareholder approval in April. However, I do know that the lower BMY goes, the lower the overall deal goes.
In that sense, keep an eye on $46. This level has played a big role over the past few years. If BMY loses this mark, the deal value may look grim. Over $50 and BMY looks much better.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long CELG.
