This morning’s weakness is the latest test for bulls’ resolve. I’m betting the dip will follow the path of its predecessors and prove a buying opportunity. Today’s gallery will look at three of the best-looking breakout stocks to buy this week. They all belong at the top of your watchlist.
Rather than zero-in on a specific sector, I’m going the diversified route to increase the chances of success. Whether money rotates into metals, financials, or technology, we’ll be prepared to profit. Additionally, all three of today’s picks sit in different spots on their trends.
One just popped to a record high on Friday. The second is on the cusp of completing a bottoming pattern after getting pounded all year long. And the third recently took out resistance and is gunning for its old highs.
Let’s take a closer look at three of the most compelling breakout stocks to buy.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) receives high marks for consistency. Its uptrend has been one of the most stable and reliable among the entire technology industry in 2019. The year-to-date gains for MSFT stock have grown to 43%, far outpacing that of the sector.
As far as its price chart goes, MSFT checks all the bullish boxes. It’s perched at a record high, has rising moving averages across the board, and boasts volume patterns that lack any warning signs.
While today’s weakness is pulling the stock lower, the losses are mild. Implied volatility remains considerably low, so option premiums are cheap. To capitalize on continued strength, buy the January $145/$150 bull call spread for around $2.25.
United States Steel (X)
Steel stocks have been a terrible place to be this year. As has pretty much the entire metal and mining industry. But the recent price action has my spidey senses tingling. Here are three reasons why I’m turning more bullish on United States Steel (NYSE:X).
First, its trend is on the verge of completing a rounded bottom pattern revealing a subtle but consistent shift in the balance of power from sellers to buyers. Second, its behavior since the latest earnings announcement has been very constructive with shallow retracements and multiple accumulation days. Third, X stock keeps chipping away at resistance near $13.75, leading me to believe a breakout could be imminent.
Implied volatility remains elevated and makes selling options attractive. If you think the stock remains aloft going into year-end, then sell the December 12 puts for around 45 cents.
Aflac (AFL)
Our final pick turns to the financial sector with Aflac (NYSE:AFL). Last month’s breakout of $53 marked a key change in character and paved the way for a return to its July peak at $57. Both dips that have since developed were bought relatively quickly, confirming buyers remain able and willing to defend their turf.
This morning’s down gap was rapidly reversed and increases my confidence that it should be included in today’s gallery. Low implied volatility and the cheap price tag of AFL stock make bull call diagonal spreads an interesting proposition. Buy the January $52.50 call while selling the December $55 call for a net debit of $1.80.
You’ll capture around a 50% return if Aflac sits at or above $55 come December expiration.
As of this writing, Tyler Craig held bullish positions in MSFT. For a free trial to the best trading community on the planet and Tyler’s current home, click here!
