The stock market ended a tough holiday-shortened trading week, as volatility continues to creep back into the market. With that in mind, let’s look at a few top stock trades for next week.
Top Stock Trades for Monday No. 1: Peloton (PTON)
The stock has rallied more than 450% from the March lows to this week’s high. Now reversing from the two-day highs to below Thursday’s low, PTON may need a break.
I would love to see another retest of the 20-day moving average — at the very least. Ideally though we can get a deeper dip down into the 50-day moving average and uptrend support (blue line). There, near $70, gives investors a better risk/reward than near $100.
If this level fails, it could put $50 in play if it’s in combination with a deeper correction in the broader market.
Top Stock Trades for Monday No. 2: Chewy (CHWY)
Chewy (NYSE:CHWY) gave us the exact trade we were looking for. The stock broke out over $60 and raced to the 261.8% extension up near $75. The ensuing pullback sent shares down to the 20-day moving average ahead of earnings.
Unfortunately, the reaction wasn’t what bulls were looking for, with shares off about 10% on Friday. The dip is sending Chewy down into the 50-day moving average and 161.8% extension.
A slightly deeper dip gets it to the $52.50 breakout level. A hard close below that may very well put $45 range support and the 200-day moving average in play.
However, long-term investors or traders who profited on the breakout up toward $75 and have a longer time horizon may consider nibbling on this current dip into potential support. For those that would rather way, a move back over $62 could put $75 back in play.
Top Stock Trades for Monday No. 3: Dave & Busters (PLAY)
Dave & Busters (NASDAQ:PLAY) looked like it was itching for a breakout over $20, up toward the 200-day moving average and June highs near $23.43.
However, it couldn’t do it on earnings, down just more than 8% on Friday. For now, the 20-day moving average is acting as support. With uncertainty starting to climb and with PLAY stock not exactly a relative strength leader, I’m going to need more than a hold of the 20-day moving average on a Friday to get me long.
Specifically, I’d like to see PLAY stock shares trade lower, down into the 50-day moving average and uptrend support (blue line). There, I believe, is a better risk/reward setup for investors provided it holds as support if and when it gets there.
If that doesn’t play out, look for PLAY stock to reclaim the 20-day moving average, allowing bulls to use Friday’s low as a key reference.
Top Stock Trades for Monday No. 4: Invesco QQQ ETF (QQQ)
The Invesco QQQ ETF (NASDAQ:QQQ) has been wavering in recent trading. Shares were hit hard from the $300 level and while it made an admirable recovery last Friday to close above the 20-day moving average, that strength did not carry over into this week.
Instead the QQQ broke down to the 50-day moving average, which held as support. However, its rebound was rejected by the 161.8% extension and the 10-day and 20-day moving average.
Now it’s flirting with a loss of the 50-day and 10-week moving averages. It’s also giving us a weekly rotation lower and flirting with a loss of the August lows.
Despite this, it’s not all doom and gloom. The price action amounts to uncertainty as bulls and bears fight among different timeframes.
Next week, let’s see if the QQQ can reclaim the 50-day. Above puts the 20-day moving average back on the table. However, should it lose $264.63 — last month’s low — it could open the door to a larger correction. Specifically, it could put the $250 area in play and if it’s really slick, perhaps the 10-month moving average down near $243 at the moment.
But hey, let’s not be in a hurry to be overly bearish just yet. Instead, let’s be on our toes and look for the market to pick a direction, then react.
On the date of publication, Bret Kenwell held a LONG position in CHWY.