Tech stocks are stole the headlines yesterday with the Nasdaq-100 officially reaching a record high. In celebration of the milestone, and to help you make some dough, here are three Nasdaq stocks to buy.
Some would say yesterday’s push into all-time highs was inevitable. Large-cap tech has led the market recovery since day one. Relative strength was even its loyal companion during the March massacre. Compared to the broader S&P 500’s drop of 36%, the Invesco QQQ ETF (NASDAQ:QQQ) was only down 31% at its trough.
While it’s true that the market recovery has broadened out to include small-caps and sectors that initially lagged, it hasn’t come at the expense of the tech sector. We’ve seen a slight slowing in the ascent over the past two weeks, but all support zones have held firm, and the uptrend remains intact.
Here are the heavy hitters in focus today.
Let’s take a closer look at the price levels that need to be broken before you pile in with new trades.
Nasdaq Stocks to Buy: Apple (AAPL)
As the largest holding in the Nasdaq-100, Apple deserves the first mention. Unlike QQQ, AAPL stock hasn’t eclipsed its February peak at $327.85. As of Monday’s close, it was still 1.7% away. The silver lining of not yet breaking out is we aren’t forced to chase. Instead, we can build out a bullish strategy conditional on the tech giant clearing resistance.
In fact, the longer it coils up here, the more compelling the future resistance breach becomes. Longer-term bases usually yield bigger rallies than those comprised of only a few candles. Another reason the pause is welcome is it allows the stock to work through the overbought pressures arising after April’s ascent.
The volatility lull settling on Apple shares has driven options demand into the toilet. The implied volatility rank is only 11%, reflecting cheap premiums.
Once AAPL closes over $327.85, consider buying call spreads.
The Trade: Buy the July $330/$340 bull call spread for around $4.
Amazon (AMZN)
The search in online shopping during the stay-at-home phase of the novel coronavirus crisis made Amazon the ultimate safe haven stock. At least, once cooler heads prevailed. Every risk asset plunged from late-February to early-March. But once investors realized traditional retailers’ pain was AMZN stock’s gain, they came rushing back in.
Over four sessions in April, Amazon roared $400 higher to a new record. Since then, it has mostly gone nowhere. And that’s not necessarily a bad thing. Its moving averages across all time frames are still rising, and they confirm buyers still control all trends. Plus, it’s not near as overbought as it once was.
With AMZN stock ending lower on Thursday, I’d want to see a push above the high ($2,507) before entering new bullish positions. To better control the cost on such a high-priced underlying, options spreads are a must. Call verticals, like that used in the Apple trade above, are my vehicle of choice. There’s a vast number of strikes available so you can modify the spread width to make the trade cost match whatever you’re willing to invest.
Here’s an example of a $20-wide spread.
The Trade: Buy the Aug $2,580/$2,600 bull call spread for around $7.30.
Microsoft (MSFT)
The path of MSFT stock has modeled Apple’s more than Amazon. It hasn’t reached a new high and has treaded water for the past six weeks. Unlike AAPL stock, though, MSFT stock did break below its 20-day moving average showing weakness in the short-term trend.
I remain bullish on the intermediate- and long-term trends, however. The past few weeks of chop are ultimately healthy. Support levels are holding firm, and we haven’t seen any signs of distribution cropping up in the volume panel. Unless something sours the overall market’s upward mobility, an eventual breakout over $190 is highly likely.
Consider using $200 as the next target. The theme of cheap options in Nasdaq stocks continues with Microsoft, once again making call spreads the go-to idea.
Wait for a break over $190.70 to confirm the software sultan has finally felled resistance, then pull the trigger.
The Trade: Buy the Sept $190/$200 bull call spread for around $3.75.
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