The market had trouble gaining upside momentum on Friday, as tech and growth stocks came under selling pressure. With that in mind, let’s look at a few top stock trades for next week.
Top Stock Trades for Monday No. 1: Fastly (FSLY)
Are you interested in Fastly (NYSE:FSLY) as a long-term investor? This was a favorite holding of mine earlier this year. Then the stock rallied 1,000% in a few months, and it became too rich for me.
Now that the stock has pulled back, perhaps it is worth another look. Many bulls were hoping that Thursday’s post-earnings spill of 17.7% would be the end of the selling. Well, we’re seeing another painful day on Friday, as the 20-day moving average and uptrend support failed to buoy the name.
Now, shares are approaching the 50-day moving average. If you plan on holding this one for a while — like, a few years — then there are likely worse things you can do than nibble FSLY at the 50-day.
Ultimately, this name could see $50 — particularly if we get a selloff in the broader market. Now 32% off the highs in just a few days, though, and shares may be nearing an exhaustion point. Keep this one on your radar.
Top Stock Trades for Monday No. 2: Alibaba (BABA)
Alibaba (NYSE:BABA) was dinged on Friday, down more than 5% as the tension between the U.S. and China continues to grow.
Shares are losing the 20-day moving average in the process, while $265 cements itself as resistance. Let’s see if we can’t get a bit more downside selling pressure in this one before taking a closer look at it.
Specifically, I want to see BABA stock trade down into the $235 to $240 area, where it finds recent range support and the 50-day moving average. Below $233 could get some gap-fills going down to $225 and $215, respectively.
Provided that much selling doesn’t take place, though, look to see if Alibaba can reclaim the 50-day moving average. Above puts $260 to $265 back in play.
Top Stock Trades for Monday Tomorrow No. 3: DataDog (DDOG)
Ouch, DataDog (NASDAQ:DDOG) is getting whacked here — down more than 16% after reporting earnings.
Shares are making a decisive decline below the 50-day moving average and $82 level as a result. On the upside, these levels have to be reclaimed for bulls to regain momentum. Based on the intensity of the selling though, it looks like we could get some more washout in this name like Fastly.
On the downside, however, keep an eye on $71. This is the two-times range extension, followed by $62.
Top Stock Trades for Monday No. 4: S&P 500 (SPY)
Let’s talk about the S&P 500. Whether you trade options on the index, futures or the SPDR S&P 500 ETF (NYSEARCA:SPY), this is one to keep up on the screens.
We’ve now seen a multi-month rally extend more than 50% from the lows. More recently, the index has now filled the gap from February. That is a “job well done” for me, but in this particular case, it leaves more questions than answers. That is due to the uncertain climate we find ourselves in.
We’re now left with an interesting position: Do we go on to retest or potentially push to new all-time highs, or do we begin to correct? A drop to the 50-day moving average would be reasonable. Heck after such a strong run, even a drop to the 3,000 level wouldn’t be so crazy.
Not that I am a huge fan of shorting a massive bull market, but for short-sellers, were getting to a point where it may be a reasonable risk/reward to lean the other way. Let price confirm though — and always obey your stops.
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.