After starting off lower on the day, U.S. stocks made a strong recovery in Monday morning trading. Let’s look at a few top stock trades as a result.
Top Stock Trades for Tomorrow No. 1: Amazon (AMZN)
In late December, Amazon shares broke out over channel resistance (blue line) and the 200-day moving average. After hitting $1,900, the stock recoiled, but found support at previous resistance. That was a sign that bulls were in control and with the latest action, it looks like more upside could be in store.
$1,900 continues to stymie Amazon stock, but a move over it could trigger a gap-fill up to $1,970. Below $1,830 and the setup is much less attractive for bulls.
Keep the downside in mind, as the markets have increased in volatility in recent trading.
Top Stock Trades for Tomorrow No. 2: Gold ETF (GLD)
The SPDR Gold Trust ETF (NYSEARCA:GLD) has been on fire ever since breaking out in late December. On Monday, the GLD hit new highs as gold hit its highest prices in years. While impressive — as is the recent volume (blue box) — the move is unsustainable.
The GLD is pulling back from its opening prices on Monday, as traders sell the large move higher. The RSI (blue circle) suggests shares are overbought, too.
That doesn’t mean the GLD can’t go up to $150 or will embark on a massive pullback. Only that it needs to cool off if it wants to continue higher. I’d like to see a decline down toward the $144 area. If support can step in there, perhaps along with the 20-day moving average, then it’s possible bulls can take the GLD higher on a more sustainable rally.
Top Stock Trades for Tomorrow No. 3: AT&T (T)
AT&T (NYSE:T) continues its gentle rise higher, but resistance at $39.50 is keeping a lid on the stock. Since September though, shares have put in a series of higher lows.
This makes the setup rather simple for bulls. Either the stock will need to break out over $39.50 or it will need to pull back to uptrend support (blue line).
A breakout will need to hold over $39.50 and ideally take out the November high at $39.70. A decline down to uptrend support will need to hold, otherwise, the $36 to $36.50 area is on the table.
Top Stock Trades for Tomorrow No. 4: Raytheon (RTN)
Defense names have been breaking out, and Raytheon (NYSE:RTN) is no exception. Shares broke out on Thursday, gained further on Friday and gapped significantly higher on Monday.
But like oil, gold and other escalation plays, that gap up was met with sellers, just as the gap down in U.S. equities was met by buyers. Should RTN stabilize, see if it can take out the $232.50 level.
If it loses $225, it likely puts the $220 breakout breakout level and rising uptrend support (blue line) on the table. If it falls below those marks, the 50-day moving average is the next line of defense for bulls.
Top Stock Trades for Tomorrow No. 5: SmileDirectClub (SDC)
SmileDirectClub (NASDAQ:SDC) is surging on Monday. Even well off its highs, SDC stock is still up more than 20% on the day. Is the stock finally turning a corner?
Downtrend resistance (blue line) had brought SDC stock all the way from $20 to the single digits. However, shares quietly crept over this mark over the past few sessions. Bulls may be have felt better about the stock as a result, but few likely predicted Monday’s 20% move that would reclaim the 20-day and 50-day moving averages.
From here, I would love to see SDC stock hold up over the $10 to $10.20 area, which has been resistance since November. Over $10.20 puts $11 — the November gap — in play. Over that mark and the $12.50 to $13 area is possible.
If that seems extreme, remember, this stock went public at $23 in September and bottomed at $7.56 in December.
Below $10 and the 50-day moving average is the next level of support, but since it’s newly established and has never really been tested, there’s no telling if it will hold.