Stocks blasting to new highs usually come bearing gifts — for bulls, at least. If you’re a bear, then beware because these super-powered leaders pack a punch. And that makes them some of the best stocks to buy.
I ran a quick scan last night for new yearly highs. With Wednesday’s rally, dozens of stock made the list, giving me ample choices from which to identify who deserved a coveted spot in today’s gallery. The infatuation with stocks that are blazing into virgin territory, or at least new yearly highs, is well founded.
Shareholders are basking in profits. There is no overhead supply, no group of afflicted owners begging to get back to breakeven. Short sellers are losing money — more than ever before. And that creates some serious incentive to cover their positions.
More demand + less supply = bullish.
Check out these three stocks to buy at new highs.
Stocks to Buy at New Highs: Cisco (CSCO)
Were it not for Cisco’s (NASDAQ:CSCO) inclusion in the list, the title would have been “3 Stocks to Buy at Record Highs.” But during the height of the dot-com bubble, CSCO stock rallied as high as $82 before its crash to single digits. And that means this week’s jump to $55.82 only represents a fresh 19-year high.
It’s still impressive. The strength of this year’s uptrend has been matched by its consistency. The 20-day moving average has proven the perfect companion by supporting every pullback. Recent profit-taking formed a high base pattern that potentially triggered with yesterday’s rip.
Given this year’s history of profitable breakouts, I see no reason to bet against another upside thrust. Consider buying the June $55 calls for $2.65.
Since breaking out of last year’s trading range, Paypal (NASDAQ:PYPL) has been on a tear. With yesterday’s bump, its year-to-date gains now stand at 28%. The last upswing saw increasing momentum, and all major moving averages are rising beneath the price.
Volume patterns are also backing the bulls. I see a handful of accumulation days over the past quarter, with only a few sporadic episodes of distribution.
The next earnings report looms on April 24, so consider that the wild card. But if you believe the trend continues, then buy the June $105/$110 bull call spread for $2.70. You could come close to doubling your money if PYPL stock rises above $110 by June expiration.
The price action of VMware (NYSE:VMW) has largely mirrored PYPL, at least recently. Its trend is booming, with the moving averages stacked atop each other in bullish form. Distribution has disappeared, with hardly any significant selling pressure. Implied volatility is even tanking, showing uncertainty is running low these days.
Pattern-wise, we’ve seen VMW stock develop a mini ascending triangle formation that it finally completed with Wednesday’s surge. If this breakout follows the script of its predecessors, big gains await. I suspect we will see a push toward $200.
To capitalize, buy the July $190/$200 bull call spread for $4.60. The liquidity of VMW options is mediocre, so limit orders are a must here.
As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.