Thursday’s down open served as a useful test of buyers’ resolve. After a stream of slow-moving sessions with hardly any adversity for bulls, the weakness finally revealed just how committed stock lovers were. I’m happy to report they passed the exam with flying colors. The uptrend remains intact, and that has me in a mood to shop for the best stocks to buy.
The strength was particularly impressive in the technology sector, which shouldn’t be surprising. Tech has been dominating since March, and it has been foolish to second-guess the leadership. Two of today’s three candidates fall in this sector. The third boasts its first pullback buy opportunity since jumping on better-than-expected earnings.
Without further ado, here are my favorite stocks to buy right now.
Let’s take a closer look at their charts and build out options trades to profit.
3 Beaming Stocks to Buy: Disney (DIS)
Disney is providing traders with a second chance of sorts. The entertainment titan soared on better-than-expected earnings, and if you weren’t already in, you likely missed the move. But after a few days of followthrough, profit-taking finally struck this week. Fortunately, the descent has been clean and orderly. The down days have seen light volume suggestive of mild register-ringing instead of trend-killing distribution.
Thursday’s down-gap was quickly gobbled up, proving buyers are still lurking below. It looks like on Friday, stocks are poised for another gap lower. This will provide a second test for whether bulls will swarm to the uptrends defense. I suggest using Thursday’s high of $128.45 as a trigger. Breaking above it will signal the current pullback is complete and a new upswing is beginning.
Implied volatility is scraping the bottom of the barrel at the 13th percentile. The cheapness of the options suggests long premium plays are the way to go.
The Trade: Buy the Oct $130/$135 bull call spread for around $1.95.
Advanced Micro Devices (AMD)
Thursday’s surge was most impressive in the technology sector. The Nasdaq ended with a bullish engulfing candle that completely enveloped Wednesday’s drop. You can chalk this up as yet another of the endless signs that traders love tech stocks. In surveying the space, I found a basket of potential stocks to buy on the dip. The action in Advanced Micro Devices was particularly attractive.
The lower open resulted in the first test of its rising 20-day moving average since last month’s epic breakout. Bulls seized the opportunity and jammed the stock higher all day long. Trading volumes rose to the highest levels of the week, officially registering an accumulation day.
AMD stock has been a market darling for years. Its sector and industry remain in demand, giving few reasons not to play the current pattern. If you want more confirmation, you can wait for a break of the $83.50 resistance zone. Otherwise, swing away.
The Trade: Buy the Oct $85/$90 bull call spread for around $1.90.
Facebook (FB)
Facebook rounds out our list of stocks to buy with a breakout setup. Ever since last month’s earnings report jammed the stock to record highs, the price action has been extremely well behaved. Selling has cropped up, but bears are phoning it in. Volume during the down days was light, and the size of the drops has been minimal.
While prices have chopped sideways, the 20-day moving average has played catch-up. Together, the past two weeks have created a high base pattern that is now on the cusp of completion. Thursday’s rally notched the most bullish candle of the past two weeks, signaling the short-term stalemate has ended. Any further strength will push FB stock outside of its range, sparking a new upswing.
I’m sticking with the theme of bull call spread ideas.
The Trade: Buy the Oct $270/$280 call spread for around $4.60.
For a free trial to the best trading community on the planet and Tyler’s current home, click here! At the time of this writing, Tyler held bullish positions in AMD and DIS.
