While lacking the momentum seen a week ago, stocks continue to a good job holding up near all-time highs. That led to a somewhat choppy trading environment on Tuesday, as we look at a few top stock trades.
Top Stock Trades for Tomorrow No. 1: Shake Shack (SHAK)
Man, Shake Shack (NYSE:SHAK) was hammered relentlessly on Tuesday, falling about 20% after a disappointing outlook. Investors could have made a better stand, but the weakness shows that the bears are in control at the moment.
Had the bulls seized control, SHAK would have reclaimed then maintained the 200-day moving average. Instead, it gapped below this mark, rallied up to it and pulled back again.
What now? Notice how SHAK is sandwiched between the 50% and 38.2% retracements. A break of either could create a “go with” trade in that direction. Meaning a break below the 38.2% retracement could trigger more selling, while a breakout over the 50% retracement could trigger a rally.
Keep it simple, although below the 200-day moving average is not bullish.
Top Stock Trades for Tomorrow No. 2: Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is finally back in favor, as the stock had been trading in a wedge (blue lines) for several quarters at this point. Investors have been waiting for a move one way or the other, and last month, it looked like that move was going to be lower.
AVGO stock is a tough one. It’s technically becoming overbought and is running into resistance between $315 and $318.
However, the U.S. government will likely allow U.S. companies to start selling to Huawei again, while AVGO has a below-market multiple and strong cash flows. Further, it just embarked on a multi-month breakout!
It’s difficult to buy into Broadcom at this point given the big rally, looming resistance and potential “sell the news” setup. I am a buyer of AVGO stock on a pullback to the $300 to $305 area, assuming it holds as support.
Top Stock Trades for Tomorrow No. 3: Lyft (LYFT)
There are many eyes on Uber (NYSE:UBER) as it makes new 52-week lows after earnings. But what about Lyft (NASDAQ:LYFT) stock?
The stock does not look healthy. It couldn’t reclaim the 50-day moving average or hold up above $44. A break below $41.50 quickly puts $40 on the table. Below that and the $38 lows are possible.
If it’s anything like Uber, it may not be long before Lyft is making new lows too. Let’s keep an eye on this one, because not making new lows on this breakdown would be notable too. However, for bulls to really gain momentum, LYFT needs to clear and hold the 50-day.
Top Stock Trades for Tomorrow No. 4: Nio (NIO)
Nio (NYSE:NIO) exploded higher by more than 30% after its partnership with Mobileye, a unit of Intel (NASDAQ:INTC).
Even though the percentage gain is impressive, shares could be running into a roadblock. While a short squeeze could continue to push Nio higher, keep in mind that shares are now running into the 50-day moving average and beginning to fill the gap from September.
Clearing the $2.40 to $2.60 will likely be difficult too. If it does, Nio can fill the gap up toward $2.75.
If resistance holds, see that $1.80 holds on a pullback.
Top Stock Trades for Tomorrow No. 5: Hertz (HTZ)
Hertz (NYSE:HTZ) is feeling some relief, as it rallies on earnings. If shares can clear the 50-week moving average, they can rally up to the 100-week moving average at $17.20. That’s also where HTZ will run into downtrend resistance.
Should the 50-week moving average hold as resistance, I want to see $14 hold on a pullback. Below that level is bad news for bulls.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AVGO.
