Wall Street is still nervous and for good reason. The economic global wars are escalating especially between the U.S. and China. Just Friday and ahead of the G7 meetings, China announced resuming its tariffs on U.S. autos. So the politicians continue to pick on headline scabs and cause upside breakout setups to fail at inopportune moments. Simply put, homework is hostage to headlines during this period.
Nevertheless, here are the top stocks trades for today: Roku (NASDAQ:ROKU), Aurora Cannabis (NYSE:ACB), VMware (NYSE:VMW), Boeing (NYSE:BA), and Salesforce.com (NYSE:CRM).
Top Stock Trades for Monday No. 1: ROKU
There is too much love for the ROKU stock. So I shorted it almost exactly at the top. My thesis was simple but I think it’s time to change my mind on that.
Short term, there could be more downside perhaps to close the open gap at $110. But eventually my take on it is to stop selling the rips and buying the dips in ROKU stock. So I would chase it back to new highs if it closes above $143 per share.
Meanwhile, ROKU stock fell on Friday but there should be support down to $133 and $127 per share. Below that it could trigger the gap fill move. So I wait patiently for the level breaks and chase them in that direction.
Fundamentally, I’ve been a critic of Roku because they’ve been in business for 16 years and they still haven’t figured out how to be sustainability profitable. But maybe that was because the environment wasn’t conducive for their business model.
Now that Netflix (NASDAQ:NFLX) established fact that the world wants to cut the cord and stream content, Roku has a better setup because it aggregates content so there will be strong demand for its services. based on this, it’s better to trade the ROKU stock than try to judge it on its lack of success in the past. The future prospects are not going to be like what has happened most of those 16 years.
Top Stock Trades for Monday No. 2: Aurora Cannabis (ACB)
Cannabis stocks are falling off a cliff after incredible hulk blah last year. But one stock stood out among all the high-profile names of late. ACB stock has held up better than most. This is not to say it’s doing well except in relation to the rest. Even Canopy Growth (NYSE:CGC) which was once considered the cream of the crop cannot find the bottom. They are all in a technical breakdown patterns setting lower lows for weeks.
Meanwhile ACB stock has been managed to hold just above a bearish pattern trigger. It even manage to set a few higher-lows recently. But since its chart is still in a negative channel, then I expect at some point that trend line will break upwards.
But the immediate goal for bulls is to hold ACB from triggering a bearish pattern that would target $4.70 per share. They can do that by holding above $5.50 now. Else there might be more pain ahead.
Eventually and if pot stocks have any future, I expect that the sectors rebounds and ACB stock should lead the charge. It’s closest to that since it’s showing relative strength now. So this stock is on the watch list and the upside triggers could start as early as $6.20 per share. If that happens it would invite more momentum buyers and cause shorts to cover and book their profits.
Since the bulls of ACB stock have so far been able to maintain the line in such negative sector-wide action, the upside scenario looks a little more likely than the breakdown. If I am long ACB stock and have not bailed on it, now is not the time to do it for the same reasons stated here.
Top Stock Trades for Monday No. 3: VMware (VMW)
VMW stock has had a terrible year so far. It’s lagging behind since it’s only up half as much the S&P 500. Moreover, VMW is down 30% from the March highs. But the opportunity to buy VMW stock is fast approaching. On Friday the stock fell 8% on a decent earnings headline.
It has fallen so far that it is reaching a long term pivot zone. These are usually support because bulls and bears have a history of tough fights there. This creates congestion and should give the VMW stock bulls the chance to stabilize the stock and mount their bounce rally.
Specifically, VMW stock is just above the last two bottoms around the Christmas corrections. So unless there is something new developing these should hold. VMW $130 per share was pivotal in early 2018 and it should again play an important part soon.
Since they don’t ring bells at bottoms, I can start a long position with an appropriate stop. It’s best to see VMW stock rise above $145 to trigger some buying to accelerate. Conservatively, I can wait it out until a clear trough develops but the downside risk from the charts seems reasonably low.
Top Stock Trades for Monday No. 4: Boeing (BA)
BA stock was almost impossible to short. Every dip was a buying opportunity. But the sad events of the Boeing 737 Max crashes changed that fact. Now the headlines are more negatively impactful than positively.
The headlines are fast and furious and the BA stock bulls are in pain.
I would buy BA stock here but this is for the long term. This is after all still a duopoly where both suppliers are overbooked for a decade in advance. So these operational and political problems here are transitory. So this is a classic scenario of this too shall pass.
BA stock sells at a 41 price to earnings ratio and pays a respectable dividend. So owning it at these levels is not paying for a lot of bloat. Most of the perceived froth has already been sold out of it.
BA stock was up on Friday even though the stock markets were down almost 2%. So this is encouraging but there is a band of resistance through 380 per share. But if the BA bulls can push through it then they target a $50 rally from there.
Top Stock Trades for Monday No. 5: CRM
This is the company that invented the cloud. It started years ago when no others were pursuing using the internet for business operations. They battled the behemoth Microsoft (NASDAQ:MSFT) and won. This should have been a sign that CRM stock had much higher levels to go.
Indeed, it’s is up 162% in five years. On Friday, CRM stock spiked another 5% on a reaction to an excellent earnings report (and then fell with the broader market). They beat all expectations and raised their forward guidance. This silenced a lot of criticism of their acquisitions efforts. Clearly this is a team that is executing on plans perfectly and the only way for the Salesforce.com stock is up.
So If I am long the stock for the long term then I am lucky and stay in it. I personally had longs as a binary bet on the earnings and it paid quickly. But I would buy CRM stock when it closes above $161 per share. From their the upside potential is for another $15 rally in the next few months. There is some short term concern from the open earnings gap.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
