Fears that the phase-one trade deal may be pushed into 2020 spooked investors on Wednesday, as equity markets stumbled lower. Let’s look at a few top stock trades.
Top Stock Trades for Tomorrow No. 1: Lowe’s (LOW)
Above is a weekly chart for Lowe’s (NYSE:LOW), which ripped to new all-time highs on Wednesday after better-than-expected earnings.
The stock has been putting in a very solid series of higher lows, shown via uptrend support (blue line). Each dip to the 100-week moving average has been bought.
Nowhere near that area now, though, what should investors do? Over $115 and LOW looks good on the long side. This mark has been resistance over the past year, so above it now bodes well for longs. Below and a dip to the 50-week moving average is possible.
No. 2: Advanced Micro Devices (AMD)
The run in Advanced Micro Devices (NASDAQ:AMD) could be coming to an end.
To be clear, the broader market may be just fine in regards to the trade situation. But AMD has been downright explosive. After shares erupted through $34.50 resistance at the start of November, new all-time highs were made over $35.55.
On a pullback, this area acted as support, which is a bullish development.
Since then, shares have climbed north of $40. It wouldn’t be surprising to see this trade unwind at some point. A dip down to the 20-day moving average — which is all the way down at $36.62 right now! — would be the first step. But ultimately, a check-back down to the $34.50 to $35.50 area would be most attractive for longs.
No. 3: Urban Outfitters (URBN)
Urban Outfitters (NYSE:URBN) has been climbing very steadily from its August lows, rallying from sub-$20 to more than $31 ahead of earnings. For those keeping track, that’s more than a 50% gain in just a few months.
To see this trade backpedal a bit comes as little surprise.
Gapping below all of its major moving averages isn’t good, though, and now support needs to come into play in order for bulls to have a chance. The $24 mark was resistance from June through August. On a pullback, this area acted as support in September. It helps that the 78.6% retracement for the one-year range is down at $23.89.
On a rebound, see that URBN reclaims its 100-week moving average. Going above that level puts the 200-day on the table. Below $24 puts $22 on the table.
No. 4: S&P 500 ETF (SPY)
Earlier this week, we looked at the small-caps ETF, the iShares Russell 2000 ETF (NYSEARCA:IWM). While that one has had trouble advancing, the SPDR S&P 500 ETF (NYSEARCA:SPY) sure hasn’t.
On Wednesday, we got the first sign of selling in a while, even though bulls bid the SPY up off the lows.
Look, a pullback down to the 20-day is not only appropriate, but it’s also healthy. Markets were technically overbought coming into Tuesday and a little shakeout keeps traders in check and could give longs a better opportunity.
Many might agree with this, but few will like if it actually pans out. But it would be best to get a 3% to 4% correction in the SPY. Some kind of correction down into the $300-ish area could be a gift to the bulls, allowing one last buying opportunity into year-end. A decline into this area puts the SPY into its 50-day moving average and down into prior resistance near $300. The October Fed-day range is between ~$302 and $304.50. A return into this area that holds as support would be a bullish sign.
Below $300 causes more uncertainty, while a 5% correction puts the SPY into uptrend support (blue line).
There’s no telling what kind of correction this may or may not end up being. But there are varying degrees of healthiness. A 5% dip will definitely cause some concern, but a fall into the $300 to $305 area could be very attractive, provided support holds where it should.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
