The running of the bulls continued in earnest on Tuesday, with stock indexes rallying across the board. The tech-heavy Nasdaq climbed another 1.4%, bringing its year-to-date gain to an incredible 33%. Finding stocks to buy has become hilariously easy. Even with the overbought conditions among the leading sectors, I’m continuing to discover quality setups in individual names.
Today’s gallery spotlights three such beauties that are begging to be bought. On a side note, I’d love to offer up a few bearish ideas just to mix-up the steady drumbeat of bullish trades I’ve been throwing out every day. But I can’t find any! And even when I have, they’ve been rapidly stopped out.
Thus, we’re left with doing what’s been working. And that is buying breakouts and the rare dips that come our way. Here are the best setups I can find going into Wednesday.
After a quick explanation of their positive price action, I’ll offer up a smart options trade to capitalize.
Breakout Stocks to Buy: Pinterest (PINS)
Pinterest’s earnings gap in late July put it on the map for me. The surge carried PINS stock to a new record and made it a must-buy into weakness or a breakout setup. Unfortunately, its first attempt at pushing through resistance following the gap resulted in a nasty fakeout. After a choppy few sessions, buyers righted the ship, and Pinterest just popped through resistance once more.
With the higher volume backing Tuesday’s burst, I think this attempt has a good chance at success.
Implied volatility has been climbing alongside the price, reflecting an uptick in demand for options. To capitalize on the juicier premiums, I like selling puts.
The Trade: Sell the Oct $32 put for 90 cents. Consider it a bet that PINS stock remains above $32.
Yeti is another company whose stock price is notching an all-time high. The global pandemic worked to the company’s benefit, with earnings making a rapid-comeback after May’s lackluster quarter.
Consolidation over the past month created an ascending triangle that looks to have ended with yesterday’s 4.2% jump. Every single breakout over the past five months has rewarded buyers, and I see no reason why we should view this one differently.
Implied volatility is in the tank at the 18th percentile. Couple that with the $53 price tag, and I like bull call diagonal spreads here.
The Trade: Buy the Oct $52.50 call while selling the Sep $57 call for a net debit around $3.50.
The max loss is limited to the $3.50 debit. Shoot for a gain of $100 to $150 if YETI rises toward $57 in the next two weeks.
Salesforce.com is on top of the world. After getting added to the prestigious Dow Jones Industrial Average, the cloud-based software giant shattered earnings expectations and jumped 26% in a single session. At $281.25, it boasts the third-largest weighting in the Index after UnitedHealth Group (NYSE:UNH) and Home Depot (NYSE:HD). If it wasn’t already on your radar as one of the best stocks to buy, it should be now.
Price action since the gap has been as constructive as ever. Rather than retreating on profit-taking, CRM stock has held firm, creating a clean high-base pattern. After only three days, buyers are emerging once more to chase the stock higher. Tuesday’s 3.2% bump cleared resistance, signaling the beginning of what could be a run to $300.
Implied volatility remains high at the 42nd percentile, suggesting spreads are smarter than long calls. It’s high enough to make bull puts an attractive play as well, so you can take your pick here. I’ll outline a bull call below.
The Trade: Buy the Oct $290/$300 bull call spread for around $3.55.
The max loss is $3.55, and the max gain is $6.45.
On the date of publication, Tyler Craig held a long position in PINS.
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