Wednesday was a strong trading session for the bulls, until the last 90 minutes. Unfortunately, negative news regarding the stimulus bill triggered some selling — cutting into the day’s gains. That said, let’s look at a few top stock trades.
Top Stock Trades for Tomorrow No. 1: Micron (MU)
Micron (NASDAQ:MU) beat on earnings but did not impress investors enough with its guidance, as shares ended the day down more than 7%.
The stock could continue to decline, potentially falling to $46 and filling the gap from earlier this month. If it continues lower, Micron could challenge its September and August lows at $44.45 and $42.25, respectively.
However, the stock could also find buyers near uptrend support (blue line). More notable is the 50-day moving average, which Micron is flirting with losing on Wednesday.
Shares have respected this mark as both support and resistance this year and most recently, it’s been acting as support. If it holds, look to see if Micron can reclaim the 200-day moving average.
Above puts a test of the $51 to $52 area in play.
Top Stock Trades for Tomorrow No. 2: Datadog (DDOG)
Datadog (NASDAQ:DDOG) was trading nicely today, testing down into the 10-day moving average and reversing higher. The would-be two-day decline came after shares tried but failed for a weekly rotation higher on Monday.
However, that “two-day decline” turned into a one-day decline after shares erupted higher on the day. Confirming a partnership with Microsoft (NASDAQ:MSFT) sent traders into a bidding frenzy, quickly driving this name up over $100.
On the downside, I would love to see ~$100 hold as support, which is roughly the high from July. Below puts the 10-day moving average and last week’s high near $95 on the table.
On the upside, though, let’s see if DDOG can climb to the 161.8% extension at $151.30. That’s being measured from the August low to the July high, by the way.
Top Stock Trades for Tomorrow No. 3: S&P 500 ETF (SPY)
The SPDR S&P 500 ETF (NYSEARCA:SPY) is trying to clear the 50-day and 20-day moving averages. It was also trying to rotate back over the pre-coronavirus highs near $339.
Wednesday’s action isn’t the nail in the coffin — at least not yet — but it’s certainly discouraging.
The SPY was taking back all three of these levels with a potent rally on impressive breadth. Particularly after Monday’s strong breadth day of bullish volume.
However, if we get a close below this week’s low at $331.62, it could trigger a gap-fill toward last’s Friday’s range. In that scenario we’ll need to see which group steps in — buyers or sellers — to see how the market handles itself from there.
For now, I am not alarmed by the action, but I am cautious of it. I would have felt a lot better about being long with the SPY over the 20-day and 50-day moving averages and over $340.
Top Stock Trades for Tomorrow No. 4: SuRo Capital (SSSS)
SuRo Capital (NASDAQ:SSSS) is not a well-known name like Microsoft. However, its stock is in the news thanks to the Palantir (NYSE:PLTR) listing, which SSSS has a stake in.
Due to valuation issues though, SSSS stock has been under pressure.
Shares had been chopping up against $14.50 resistance this summer, before fading in late August and finding support in the $11.50 to $12 area. Breaking through that level now — down 15% on high volume — SSSS stock isn’t looking good.
Maybe the 100-day moving average provides a bounce, but really, sellers could be sniffing out a gap-fill down at $10. Plus, Palantir stock is going to be a driver for SSSS stock.
Below $10, and investors have to be aware of a test of $9 and the 200-day moving average. On the upside, look for SSSS to reclaim $11.50, then test the 50-day moving average.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.