The Nasdaq and S&P 500 notched new record highs on Monday. Let’s look at a few top stock trades going into Wednesday.
Top Stock Trades for Tomorrow No. 1: S&P 500 ETF (SPY)
In late October, the SPDR S&P 500 ETF (NYSEARCA:SPY) broke out over multimonth resistance near $300. Since then, it has continued to churn higher, only pausing momentarily to catch its breath.
Pressing against $310 now, the ETF is starting to show technical signs of becoming overbought (blue circle).
Perhaps the SPY is an excellent buy right here, right now for those with a one-year outlook. Maybe it’s an excellent sell. No one will know until we’re looking back in hindsight.
But as it stands, this is at least a chart that should give investors pause about near-term upside. The ideal scenario would be for a pullback down to the $300 level that holds as support. That would be an excellent “go-long” signal, especially ahead of a potential year-end rally.
While stocks can continue higher, becoming more overbought may only make the ensuing correction worse. Should shares continue higher, there’s a channel resistance mark between $318 and $320, depending on when the SPY ETF gets there.
This isn’t an alarmist call by any means, but perhaps a signal to consider booking at least some profits and/or holding off on initiating full-sized long positions.
Top Stock Trades for Tomorrow No. 2: PayPal (PYPL)
PayPal (NASDAQ:PYPL) was on fire for a while, but that rally has come to a painful end. Now, shares have been pulling back since July.
The $94 to $95 area acted as support last month and PYPL stock is working on putting in a higher low (purple lows).
While that’s a positive development, this chart has a long ways to go before looking healthy on the long side. In short, bulls need to see PayPal clear downtrend resistance (blue line) and preferably the 200-day and 100-day moving averages as well.
Below the recent low at $99.60, PYPL could retest its October low at $94.77.
Top Stock Trades for Tomorrow No. 3: Disney (DIS)
To much fanfare, Disney (NYSE:DIS) launched its Disney+ streaming service on Tuesday. Is it a sell-the-news event? Not necessarily.
Shares have put together a relatively tight three-day range, which includes Disney’s post-earnings reaction and the launch of its new flagship streaming service. In other words, it’s important.
Shares are over the 100-day moving average now, and this is the must-hold level of support. Below that and DIS could pay a visit to its 50-day moving average. $140.25 is the post-earnings high and the gatekeeper to higher prices. Beyond this mark and Disney shares can continue to push higher.
So long as it’s above the 100-day, DIS stock looks okay on the long side.
Top Stock Trades for Tomorrow No. 4: Amarin (AMRN)
Shares of Amarin (NASDAQ:AMRN) are scorching higher Tuesday, up almost 20%. The move filled the July gap near $21 before pulling back later in the session.
Trading these big moves can be difficult, but we can use recent ranges to help pick our spots.
Over Tuesday’s high and the $21 gap-fill, and AMRN stock can rally to $23. This mark has been resistance for about a year now.
If shares pull back, see if $19 can buoy the name. If not, the stock could pay a visit to the 200-day moving average, but we’ll have to keep an eye on AMRN in this event, as buyers may step in before that.
Top Stock Trades for Tomorrow No. 5: Overstock (OSTK)
Because of Overstock’s (NASDAQ:OSTK) wicked volatility, it’s one of the few stocks on my personal “do not trade” list. However, just because I do not trade it doesn’t mean others do not — but they should be aware of the volatility, as the chart highlights on its own.
Unfortunately for OSTK bulls, this stock made a very decisive move below support between $9 and $9.50, plunging below $8 at one point Tuesday. As long as it’s below $9, I would consider Overstock a no-touch.
A close back above $9 could get a squeeze going, potentially up to the $11.50 to $12 area. There are plenty of better stocks to bottom fish with than OSTK at this time, in my opinion.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long DIS.
