Tension in the Middle East caused the S&P 500 to sink 1% at the open, although buyers bid stocks up off the lows. Let’s look at a few top stock trades going into the first full week of 2020.
Top Stock Trades for Tomorrow No. 1: Chipotle (CMG)
One of my favorite things to do when we see turbulence in the market? Find relative strength. That is, stocks that are outperforming the overall market. Case in point? Chipotle Mexican Grill (NYSE:CMG), which hit new all-time highs on the day.
This stock has bounced hard off the 200-day moving average and its November low at $728. Shares of Chipotle are trying to push through this difficult $840 to $850 area now after breaking out of its rising channel (blue lines).
Let’s see if CMG can gain momentum over this area, potentially up to $900. If it can’t (or if the broader market weighs it down), look for former channel support to buoy the name. Below breaks the short-term bull thesis and puts the 50-day moving average on the table.
Top Stock Trades for Tomorrow No. 2: Tesla (TSLA)
Shares of Tesla (NASDAQ:TSLA) have been on fire, and that didn’t change on Friday. The stock ripped to new all-time highs of $454 before retreating like CMG did. The question now is, can TSLA continue to power higher?
As long as shares are over $430, it’s hard to get bearish on the name. Look to see how it handles next week. Does it trade down to $430 or up to $454?
If it’s the former, see if $430 supports the stock. Below there puts the recent low of $402 on the table, as well as prior channel resistance (blue line) and the 20-day moving average. If it’s the latter and Tesla rallies back up to its current high, see if it can breakout or if this mark acts as resistance.
Top Stock Trades for Tomorrow No. 3: JD.com (JD)
JD.com (NASDAQ:JD) was a beauty on the day, giving day-traders a quick and profitable red-to-green trade.
This stock has been on fire lately — and in fact, many Chinese equities have been. JD.com hit a new 52-week high on Friday as buyers continue to bid it higher. Shares are riding uptrend support (blue line) and the 20-day moving average higher.
For now, the stock is a buy-on-dips into this zone. Below it could send JD down to the 50-day moving average.
Top Stock Trades for Tomorrow No. 4: Coupa Software (COUP)
Coupa Software (NASDAQ:COUP) was the “one that got away” for me this morning. I had it on my list, but didn’t pull the trigger with the morning mayhem and with $155 resistance looming overhead.
Instead of weighing the stock down though, COUP ripped right through resistance, jumping more than 6% and hitting $162.50. It was a powerful breakout, particularly given that it came on such a rocky day in the stock market.
Bulls now need to see $155 hold up as support. Falling below that level likely sends it to uptrend support (blue line) and the 50-day moving average.
Top Stock Trades for Tomorrow No. 5: Kansas City Southern (KSU)
Kansas City Southern (NYSE:KSU) is setting up in an ascending triangle pattern. That’s a bullish technical pattern where rising uptrend support (blue line) squeezes a stock into a static level of resistance (black line).
The stock poked its head over resistance on Thursday, but was battered lower on Friday as volatility jumped in morning trading. However, bulls bid the stock up off uptrend support and the 20-day moving average.
This area is now support for longs. Below it sends it to the 50-day moving average, at a minimum. If KSU can reclaim $155, see that it takes out the November high of $156.57, opening the door to $157.50 and possibly $160-plus.
Resistance has been in place for two months now. It’s make-or-break time.
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.