Another volatile session rocked Wall Street on Monday, with stocks going limit down and trading halted just seconds into the session. That said, let’s look at a few top stock trades for Tuesday.
Top Stock Trades for Tomorrow No. 1: Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) shares have been hammered from the highs, but not like some you’ll see in a moment. In any regard, shares have slumped over the past month and now sit on a prior breakout level.
This level buoyed the stock on Friday, as shares reclaimed the 200-day moving average. On Monday, that moving average is acting as resistance, while $140 is holding as support.
Below this level, though, and $130 quickly becomes a possibility. If selling pressure amps up, it’s unlikely that Microsoft will be able to hold support. If it does, see if the stock can reclaim the 200-day moving average. Above that, and $160 is on the table.
Top Stock Trades for Tomorrow No. 2: The Dow (DIA)
The Dow Jones is taking the selloff on the chin, with the SPDR Dow Jones ETF (NYSEARCA:DIA) down about 30% from its 52-week highs last month.
Last week, the DIA was able to close north of its 200-week moving average thanks to Friday’s robust recovery. However, short of that late-day rally into the weekend, this ETF remains deeply concerning.
The stock is the most oversold it’s been in five years (on a weekly basis), and it’s now below the 2018 low. Will it give up all of its gains from this election cycle? Maybe. That would drop the DIA down to about $170.
Short of accumulating the DIA for a long-term hold, buying now is akin to catching a falling knife. Reclaiming and holding the 2018 low is step one, followed by a test of the 200-week moving average.
Top Stock Trades for Tomorrow No. 3: Shake Shack (SHAK)
Shares of Shake Shack (NYSE:SHAK) are down nearly 70% from the 2019 highs to Monday’s low. However, that low comes into play near long-term support between $30 and $31. Below $30, though, and Shake Shack can continue to slide lower.
Is Shake Shack the best buy? Not necessarily, but investors who have waited patiently for a long-term position in the name may consider buying with support so close.
On a rebound, however, see if it can hit $40. Above puts the 200-week moving average near $50 in play.
Top Stock Trades for Tomorrow No. 4: Penn National Gaming (PENN)
Penn National Gaming (NASDAQ:PENN) has been clobbered. The stock is down 78% from its recent high last month. Some of these moves are rarely, if ever, seen in “normal” stocks with a black swan event like we’re seeing now.
Some investors may be looking to bottom-fish Penn. Maybe it works, but if I’m buying anything now, it’s high-quality stocks. Something I know that has staying power even if it’s being irrationally sold lower.
From a technical perspective, I need to see how Penn handles $12 if and when it rebounds. $12 is the 2016 low and roughly where the 200-month moving average comes into play. Above $12 puts the $15 to $18 range in play, with $20-plus possible above that.
On the downside, though, $6 to $7 is possible should the selling pressure keep up.
Top Stock Trades for Tomorrow No. 5: Dave & Busters (PLAY)
Dave & Busters (NASDAQ:PLAY) is also taking it on the chin. PLAY stock ended Monday’s session down more than 45%. And from its 2020 high, shares are — gulp — down 85%.
Like Penn, Dave & Busters stock is just a bloodbath right now.
At this point, PLAY stock can only go so low, but buyers don’t know when it will bottom. Could it fall another 50% to $3.60? Of course it could. It fell 45% today, so anything is possible.
On the upside, let’s see if PLAY can reclaim $10, triggering a potential upside move to $15-plus. It’s closest prior support level is all the way up at $28, almost a four-bagger from current levels.
Man, and it’s only Monday. Do not take outsized risks in this market.