October was a great month for the broader averages in more than one way. But as it is a market made up of stocks, November is ushering in three new opportunities for stocks to buy in companies whose shares have done the necessary technical work for a new bull market to appear.
Stocks are prone to corrections, and October has historically been a solid calendar month for the broader averages to take a technical respite. But in 2019 as the S&P 500 finished up 2.21% at new all-time-highs, that tendency barely saw the light of day. On the other hand, has that price action made the market too risky for stocks to buy? Not a chance.
Despite Wall Street lore, a rising tide hasn’t lifted all boats. The fact is, bullish headline feats by the broader market are often linked to a handful of mega-cap stocks like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) or Amazon (NASDAQ:AMZN). And that’s great news for today’s investors looking for opportunities in a market made up of stocks.
As we enter November I have three fresh stocks to buy. These are just now shaping up for bullish runs after large corrections and are putting together superior long-term bottoms.
Caterpillar (NYSE:CAT) is the first of our stocks to buy. You might think the machinery giant is an odd choice given the U.S.-China trade war and the company’s recent all-around earnings disappointment. The company didn’t do itself any favors in delivering a profit and sales miss, as well as below-view guidance. And based on that evidence you’d be correct to turn your back on CAT stock, but do so at your own risk.
It’s important to recognize that stocks often make long-term bottoms when the headline news is still awful-sounding. Bottom-line, this serves the purpose of keeping investors from buying a stock as a meaningful low is established. And given the circumstances, CAT stock looks like a prime candidate of this phenomenon.
Technically, shares of Caterpillar have moved from a tenuous bearish correction and into a fully-formed double bottom pattern on the monthly chart. With the formation finding support off the 50% Fibonacci level and stochastics having bullishly crossed over out of oversold territory, CAT is setting up as a stock to buy.
CAT Stock Strategy: My recommendation is to buy CAT stock above the April pattern mid-pivot and year-to-date high of $142.54. I’d advise partial profit-taking on a challenge of Caterpillar’s all-time-high and a trailing stop-loss of 8%.
Square (NYSE:SQ) is the next of our stocks to buy. Mobile payments innovator Square stock has its share of bearish naysayers. But sales growth of around 44% over the next five years towers over competitor PayPal (NASDAQ:PYPL) and other industry giants like Visa (NYSE:V). And with a market capitalization of just $26 billion and earnings on tap next Wednesday, SQ’s bottoming pattern looks like a superior opportunity for investors.
On the price chart and after failing steadfast SQ stock investors a year ago, shares have worked to form a bullish higher-low corrective double bottom pattern between Square’s lifetime 50% to 62% retracement levels. A longer-term low looks even more attractive given an oversold stochastics crossover and last month’s price confirmation of the pattern’s hammer-style September pivot low.
SQ Stock Strategy: Shares of Square can be bought today at a modest discount to the September pattern confirmation of $63.98. And with earnings a potential catalyst to move shares aggressively higher out of the bottom, this is a stock to buy. Of course, earnings reactions can be a two-way street and SQ stock is no exception. As much, I’d strongly recommend gaining exposure with a limited and reduced risk strategy such as a vertical spread or collar position with SQ stock options.
F5 Networks (FFIV)
F5 Networks (NASDAQ:FFIV) is our last stock to buy. It has been a while since the broader market’s rising tide helped FFIV stock investors. In fact, the mid-cap networking company’s shares have been ebbing lower for the last 13 months in a correction. But the tide for bulls looks to be shifting for the better off and on the price chart.
A profit and sales beat a week ago sent FFIV stock gapping higher by about 5.5%. More important, the reaction also signaled a successful test of F5’s longer-term uptrend and Fibonacci support zone. Along with a bullish divergence in stochastics, FFIV is a name to put on the radar as a stock to buy.
FFIV Stock Strategy: I’d propose waiting for a second chance confirmation of August’s bottoming candlestick. Specifically, buying FFIV stock above $150 will allow shares to trade above the pattern high, as well as potential lateral resistance tied to F5 Networks former highs. The all-time-high near $200 is recommended for taking initial profits, while a 15% stop-loss looks equally appropriate off and on the price chart.
Investment accounts under Christopher Tyler’s management currently own positions in Square (SQ) and its derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits