Last week’s gallery on breakout stocks to buy delivered big-league profits. So we’re returning to the well for three more candidates that boast price charts brimming with potential.
This week’s targets are inspired in large part by the S&P 500, which closed at a new record high of $3,013.77 on Friday. Nothing brings buyers to the yard like a major index touching its highest price in history. It reveals optimism and a risk-on attitude.
Last week’s demand surge was aided in part by Federal Reserve Chair Jerome Powell’s testimony before Congress that all but confirmed the market’s expectation for a rate cut at the upcoming July 31 meeting. Betting markets peg the odds of a quarter-point cut at 72% and a half-point cut at 28%.
Without further ado, check out these three breakout stocks to buy.
3 Breakout Stocks to Buy: Cisco (CSCO)
Friday’s rally for Cisco (NASDAQ:CSCO) succeeded where its predecessor did not. Last month’s breakout attempt over $57.50 was met with rejection and sharp selling. Friday’s bid, however, powered through the ceiling and closed at a new 52-week high.
With the gain, CSCO stock officially ended its three-month consolidation zone and signaled that the next stage of its uptrend is upon us. I’d use $60 as the first upside target. It would take a break below the 50-day moving average at $55 to invalidate the bullish backdrop. So until then, the path of least resistance is higher.
At 41%, the implied volatility rank is fiddling in the middle of its range. Couple that with earnings coming over the next month, and I think bull call spreads are the way to go.
Buy the Sep $57.50/$60 bull call spread for around $1.20.
Home Depot (HD)
Home Depot (NYSE:HD) was one of the best stocks on the board Friday. The retailer surged 2% on heavy volume to a new all-time high. On the technical front, there’s nothing not to like about its price action. The 20-day and 50-day moving averages are trending higher to confirm buyers’ dominance of the short- and intermediate-term trends.
A few accumulation days have cropped up over the past two weeks to signal institutions are wading into the waters. As far as options go, implied volatility is in the basement revealing an utter lack of uncertainty in the stock. That means prices for derivatives are dirt cheap. Long calls and call spreads offer great low-risk, high-reward bets right now.
If you think the good times continue to roll, then buy the Sep $220/$230 bull call spread for around $3.75.
Last week’s rally ushered Spotify (NYSE:SPOT) to the cusp of a clear breakout zone. In fact, SPOT stock looks better than at any time since last year’s IPO. This summer’s recovery pushed shares of the streaming music service back above all its major moving averages for the first time.
The base built throughout 2019 should serve as a solid foundation to build an uptrend from if buyers decide to press their advantage here.
If SPOT can clear $155, look for a run toward the next ceiling of $170. To capitalize, buy the Oct $160/$170 bull call spread for around $3.30.
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.