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5 Top Stock Trades for Tuesday: IWM, SQ, DHI and More

Here are the top stock trades we’re watching for Tuesday morning

Stocks were hit hard at the open, as investors continue to worry about trouble in the Middle East and the coronavirus in China. With that in mind, let’s look at a few top stock trades for Tuesday.

Top Stock Trades for Tomorrow No. 1: Small Caps ETF (IWM)

Top Stock Trades for Tomorrow No. 1: Small Caps ETF (IWM)
Click to Enlarge
Source: Chart courtesy of StockCharts.com

The iShares Russell 2000 ETF (NYSEARCA:IWM) hit $170.56 earlier this month, but has been in retreat since. On Monday, shares gapped lower, while the 50-day moving average was able to buoy the stock.

Now what?

I hate to say it “feels” like anything, because price is our No. 1 guide in the stock market. But it doesn’t feel like the market is done selling off yet. Ultimately, for the IWM, I would love a retest of the $158 to $160 area — particularly if it coincides with a test of the 200-day moving average.

This area was stiff resistance for much of 2019. If the IWM holds the $158 to $160 area on a pullback, it will be a bullish sign for the future. On a rebound, see if IWM can reclaim the $168 mark.

Top Stock Trades for Tomorrow No. 2: DR Horton (DHI)

Top Stock Trades for Tomorrow No. 2: DR Horton (DHI)
Click to Enlarge
Source: Chart courtesy of StockCharts.com

DR Horton (NYSE:DHI) delivered a strong quarterly report on Monday, helping propel the stock to new highs. While it’s nice to see the gains, DHI picked a tough time to be overbought and hitting new highs.

With the market under pressure, DHI stock may succumb to the selling too — even after its strong results.

However, above $58, and the stock remains bullish. Below puts the $56 breakout point on watch. Below the 200-day moving average, and the trend is really broken. But so long as it’s above that metric, DHI is a buy-on-dips candidate into this area.

Top Stock Trades for Tomorrow No. 3: Square (SQ)

Top Stock Trades for Tomorrow No. 3: Square (SQ)
Click to Enlarge
Source: Chart courtesy of StockCharts.com

Looking for relative strength plays is one of my favorite things to do when the market is weak. That is, look for the stocks that are flat or up on the day despite a tough session in the overall market. These are often the names that are first to really take off when the market does eventually bottom.

That said, we’re just a day or two into the selling, but Square (NYSE:SQ) continues to flex its muscles. We flagged the breakout a few weeks ago, and traders who took SQ long have made a killing.

Over $68, and SQ is still bullish. And over $72 puts more and more of the gap fill on the table, up to $80.

Those who buy the breakout and are still long, be sure not to let this one give up all of its gains — and then some. Below $68 puts the 50-day moving average on the table. Below that, and the trade loses momentum.

Top Stock Trades for Tomorrow No. 4: Alteryx (AYX)

Top Stock Trades for Tomorrow No. 4: Alteryx (AYX)
Click to Enlarge
Source: Chart courtesy of StockCharts.com

Another relative strength stud has been Alteryx (NYSE:AYX), which continue to push higher.

This stock is overbought and has been red hot, but I don’t want to bet against it while it has so much strength. Instead, I want to buy it if we get better prices.

Look for a correction down to the 20-day moving average and the $115 mark. If we only get a shallow market correction, this area could be a solid buy-the-dip zone. Below puts the 50-day and 200-day moving averages on the table, both near $109.

Top Stock Trades for Tomorrow No. 5: Citigroup (C)

Top Stock Trades for Tomorrow No. 5: Citigroup (C)
Click to Enlarge
Source: Chart courtesy of StockCharts.com

When the banks reported solid earnings and had trouble rallying — and it didn’t help that the market was overbought — we said investors should be on the lookout for a pullback.

Citigroup (NYSE:C) shares are correcting now, and hit the prior breakout level near $76.

Some investors may consider nibbling here, as shares are almost 5% off the recent high. Others may prefer to wait for a deeper correction, potentially down to the $70 to $72 area. At this level, C will be anywhere from 13.4% to 16% off the highs, and should have its 50-day moving average nearby.

On the upside, see if Citi reclaims its 20-day moving average. Above puts the 52-week high back on the table.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AYX.


Article printed from InvestorPlace Media, https://investorplace.com/2020/01/5-top-stock-trades-for-tuesday-iwm-sq-dhi/.

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