Bulls continued their momentum from the prior week, again pushing equities higher. With that in mind, here’s a look at a few top stock trades to start the week.
Top Stock Trades for Tomorrow No. 1: Alibaba (BABA)
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After a rebound from the lows, Alibaba (NYSE:BABA) stock has been stagnating over the past two weeks. However, I like the setup, because it has a well-defined risk-reward.
This type of setup is known as a bull flag (purple lines), where traders are looking for an upside move after some consolidation. Should BABA break higher out of this consolidation, we’ll need to see it take out the April highs near $215 to continue meaningfully higher.
On the downside, it’s even simpler: we need to see Alibaba hold $200. That level has not only been significant over the past several quarters, but it’s also the 50% retracement of the 2020 range. It’s also where the 50-day and 20-day moving averages comes into play.
Below this level could trigger a move down to the 200-day moving average.
Top Stock Trades for Tomorrow No. 2: Tilray (TLRY)
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Tilray (NASDAQ:TLRY) stock looked very promising at first, but has now lost much of its luster.
While ending the day up just over 4%, that’s a far cry from the 19% rally the stock was sporting earlier in the session. Shares were rejected by the $10 mark and 50-day moving average, while failing to take out the late-March high.
I don’t like cannabis stocks that much to begin with, technically speaking, and Tilray is among one of the worst in the group. I need to see more rotation into this name to really get a short squeeze and some momentum going.
Over the March 27th high at $10.60, and $14 to $16 is in play. Below the 50-day moving average, though, keeps the 20-day moving average and uptrend support (blue line) in play. Below that, and TLRY is in no man’s land.
Top Stock Trades for Tomorrow No. 3: Beyond Meat
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Another wild mover here is Beyond Meat (NASDAQ:BYND). After a post-earnings pop last week, shares are under pressure on Monday, ending the day down 8.4%.
On Friday, Beyond Meat was rejected from the 200-day moving average — something we also saw on Monday. We now know this level should be considered resistance until it is reclaimed.
On the downside, shares are trading down into the $100 mark. If it holds, bulls may try to reclaim the 200-day moving average again later this week. Above the 200-day, and the $125 to $130 area is a possible upside target.
Below $100 puts $90 in play, which was prior uptrend resistance (blue line). If that fails as support, the 50-day moving average is possible.
Top Trades for Tomorrow No. 4: Russell 2000 ETF (IWM)
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The S&P 500 had a solid day, up about 1.5%, but small caps have been the laggard in the group. However, over the past few sessions, the iShares Russell 2000 ETF (NYSEARCA:IWM) has been outperforming its larger index peers.
That was certainly the case on Monday, with the IWM ripping almost 5% at one point. It has the stock breaking out over $125. Now, though, it’s rallying right into the 50-day moving average.
Above the 50-day opens up more potential upside, starting with the 50% retracement near $133. Above that, and the IWM will start filling into that massive gap between $133 and $142. The top of that gap would bring it to the 61.8% retracement, and would represent a rather large rally.
Above the gap puts the 200-day moving average in play. Below $125, however, puts uptrend support (blue line) and the 20-day moving average in play.
Top Trades for Tomorrow No. 5: UPS (UPS)
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United Parcel Service (NYSE:UPS) is set to report earnings on Tuesday before the open, and the stock has been looking better and better. With so much e-commerce going on, bulls are hoping that UPS is set to deliver.
Bulls really need to see one of two things happen after the company reports. On the upside, they’ll want to see UPS reclaim the 50% retracement — as well as the March high at $103.80 and the April high at $103.75. Above those levels puts the 200-day moving average in play near $110.
On the downside, the less damage the better. However, above uptrend support (blue line) and the 50-day moving average bodes well for the bulls. Below does not and potentially puts $92.50 or lower in play.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret did not hold a position in any of the aforementioned securities.
