Stairs up, elevator down. Markets were hammered on Monday, with the S&P 500 shedding more than 3%, the Nasdaq Composite slipping 4% and the Dow Jones Industrial Average losing 1,000 points. Let’s look at a few top stock trades.
Top Stock Trades for Tomorrow No. 1: S&P 500 ETF (SPY)
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The SPDR S&P 500 Trust (NYSEARCA:SPY) was down more than 3.6% at one point on Monday, as investors sell first and ask questions later. It doesn’t help that a number of traders likely had their stop-orders filled at horrendous prices amid a brutal gap down this morning.
You can see why trading can be so tough. With gap-downs like this, it doesn’t give investors much of a chance to adjust without locking in sizable losses. In this case, the SPY gapped below the 50-day moving average and moved lower throughout the day.
It’s now approaching the $320 level, which has been a significant level in 2020. A move below it puts the 100-day moving average in play, along with a small gap-fill in the $317 to $318 area.
We’re now down about 5% from the highs. Down 10% to 11.5%, though, gets the SPY down into that $300 to $305 area and would be an excellent buy-the-dip opportunity. I don’t know if we get there, but I’d view such a decline as an excellent opportunity.
For now, let’s see how $320 holds up.
Top Stock Trades for Tomorrow No. 2: Nasdaq ETF (QQQ)
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The PowerShares QQQ ETF (NASDAQ:QQQ) is similar to the SPY, but a bit more extreme. While the decline is larger, at least the QQQ is holding the 50-day moving average.
I don’t know how long that will be the case, though. If it gives way, the down-10% mark comes into play around $213, while the 100-day moving average is near $209 and rising. Just below that is a small gap-fill from mid-December.
With these types of moves, it’s hard to gauge the magnitude of the coming decline. So far, the technicals are not broken for the QQQ, with its intermediate- and long-term trends still intact.
But as volatility increases, so do the odds that these trends will break or be stressed. If the 50-day holds, let’s see if the QQQ can bounce back up to $230. Below the 50-day, however, and selling pressure could increase.
Top Stock Trades for Tomorrow No. 3: Microsoft (MSFT)
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Getting to some individual stocks, Microsoft’s (NASDAQ:MSFT) action stood out to me on Monday. The stock opened just above the 50-day moving average, traded lower and is now bouncing with some force.
However, shares are struggling to reclaim $175. We now have a rather binary situation with MSFT, at least when it comes to the charts. On the upside, keep an eye on $175. Above puts $180-plus back on the table, and keeps bulls in control.
On the downside, though, watch the 50-day moving average. The stock hasn’t closed below this mark since October, and doing so now will show a wane in momentum. Below the 50-day puts Monday’s low on the table. Below that, and the 100-day moving average is possible.
Top Stock Trades for Tomorrow No. 4: Regeneron (REGN)
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Regeneron (NASDAQ:REGN) shares were one of the few names in the green on Monday. In fact, shares are nearing their highest levels in a year, as REGN opened below $400, sank to $386-and-change and reversed higher.
Now over $420, bulls have to be looking at $430. The stock can get there with another notable push, but has really struggled to maintain momentum above this mark, just as it has struggled with $420.
On the downside, this one has been volatile. Just look at the dip it suffered in January, falling all the way to $330. However, so long as it’s above the 50-day moving average and uptrend support (blue line), then investors can remain long. Below, however, puts the 100-day moving average 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 did not hold a position in any of the aforementioned securities.
