The market is starting to pick a direction and for many trend traders, that’s great. They don’t care which direction the market is going in, as long as it’s going in one. Unfortunately, that direction may be lower. What makes this market so tough is, it takes one tweet from the president to surge or crush stocks on any given day. No matter your political affiliation, that makes trading tough. We’ll do our best though, as we look at a few top stock trades for Friday.
Top Stock Trades for Tomorrow #1: Amazon
We weren’t surprised by the bounce in Amazon (NASDAQ:AMZN) with shares testing the 50-day earlier this month. However, InvestorPlace readers also shouldn’t be surprised if AMZN goes on to test the 200-day now.
Shares are breaking below the month’s low, is below the 50-day for the first time since March, and made a lower high when it found the 20-day moving average to be resistance a few days ago.
The market can turn on a dime and AMZN could reclaim the 50-day on Friday or early next week. But right now, the charts are pointing to a further decline down to the 200-day. If it overshoots, look for the $2,700 breakout level to buoy the name.
But I suspect Amazon will attract some buyers near $1,750 assuming it gets that low, and at least on its first test.
Top Stock Trades for Tomorrow #2: Hormel
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Hormel (NYSE:HRL) was a tricky post-earnings trade. Shares are down just 1.25% — actually outperforming the S&P 500 on Thursday — but took a mighty tumble earlier in the session.
Shares hit a low of $37 in the first few minutes of trading and haven’t looked back since. It gives investors a level to shoot against should they decide to take a position in this name. Holding up over $36 to $37 is constructive, but HRL still has its work cut out for it.
The stock is still struggling to hurdle the 20-day moving average, currently at $39.74, while even larger resistance looms higher. Not only has $40 to $40.50 kept a lid on the stock since April, but the 10-week and 50-week moving averages are converging in this area. Further, the 50% retracement for the one-year range is up a little higher, near $40.90.
If HRL can clear this area — say to $41 — it could continue moving higher.
Top Stock Trades for Tomorrow #3: L Brands
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L Brands (NYSE:LB) is locked in a brutal multi-year downtrend. The 50-day and 20-day moving averages continue to act as resistance, which we’re seeing play out on Thursday post-earnings, even though LB has so far rallied off its session lows. Incidentally, these were fresh 52-week lows as well.
What now?
While this is an apparel play, I would rather go with Target (NYSE:TGT), Home Depot (NYSE:HD), TJX Companies (NYSE:TJX) or another retailer that has momentum right now. As it relates to LB, shares need to reclaim the $25 level and the 20-day moving average for bulls make any headway. Below increases the odds that it will take out this week’s low at some point down the road.
This stock is down massively from its highs a few years ago, off more than 70% from peak to the recent low. Above $25 could get LB to $27.50 and/or the 50-day if momentum continues.
Top Stock Trades for Tomorrow #4: Best Buy
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The 20-day and 50-day moving averages are acting as resistance and the stock has notched a lower high. Further, the 200-day is not holding as support, nor is the $66 level or uptrend support (blue line).
Short of BBY reclaiming $68 to $69, a gap fill down to $60 seems more than possible.
Top Stock Trades for Tomorrow #5: PepsiCo
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I really wanted to cover Roku (NASDAQ:ROKU) as it makes new highs, but we’ve been all over that one since Q4 2018. Instead, we’ll do that on Friday and cover another strong stock instead: PepsiCo (NYSE:PEP).
This dividend stud has been angry, up more than 22% from its January lows. Does it deserve this type of run?
Maybe not, but I’m not going to fight the trend. Aggressive investors can buy dips into uptrend support, while more conservative bullish traders can nibble on tests of the 10-week moving average, provided it holds as support. Should trend fail, look for a possible retest of the $118 level as support.
As for upside, PEP could run into the low $130s before it hits channel resistance, even though it’s already had a strong run.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AMZN and ROKU.
