October has turned into a scary month for the markets in 2020 — for more than a few good reasons, to be sure. But amid that uncertainty, the following three stocks to buy are shaping up as less of a gamble. They look instead like investments you can sink your teeth into. Let me explain.
It’s common knowledge there’s a huge amount of uncertainty on Wall Street right now. The U.S. presidential election is Tuesday. The polarized stakes surrounding the White House and blue versus red in Congress are massive. And there’s the question of just how long it might take to find closure given what’s sure to be a contested vote. Stocks to buy, are you kidding me?
Then there’s the coronavirus. A second or maybe even third wave of Covid-19 continues to wreak havoc. Many families — and businesses other than Zoom Video (NASDAQ:ZM) or Amazon (NASDAQ:AMZN) — are certainly still very aware of that. And let’s face it, despite nearsighted cheerleading following the record GDP growth for the quarter, the economy remains a questionable mess. Stocks to buy? No thanks again, right?
Of course, there’s the always tricky and unclear business of earnings season. A headline profit beat or even a favored metric of the day doesn’t always add up as a plus sign in the investment account. Apple (NASDAQ:AAPL), Twitter (NYSE:TWTR) and even AMZN stock investors are finding that out today.
Despite what appear to be huge question marks and very real challenges, each will go away. I wouldn’t be so arrogant and out of touch as to say we’ve rounded the corner yet. But there will come a day. And guess what? Other problems and obstacles will arise, as they always do. In the interim, here are three select stocks to buy where opportunity off and on the price chart is presenting itself today.
Stocks to Buy on the Dip: DraftKings (DKNG)
Source: Charts by TradingView
The first of our stocks to buy is online sports betting upstart DraftKings. The special purpose acquisition company, or SPAC, was one of 2020’s big hits with investors. And for good reason. The very well-positioned company has been making all the right moves within a promising secular trend. Most recently a collaboration with Disney’s (NYSE:DIS) EPSN was secured.
In recent weeks “the under” has become the more popular wager. Competition could certainly be a factor. There are heavyweights like MGM Resorts (NYSE:MGM) and privately held FanDuel, among others, to consider. State adoption is moving along, but still has a ways to go. And of course, while pro and college sports have been called to field, there is always that question of a time out and whether things will ever be remotely close to what they were. Still, there comes a time when taking the other side makes increasing sense. And today we’re seeing that shape up on the weekly price chart.
Technically, DKNG is testing a second uptrend line and 50% retracement level from DKNG’s pre-SPAC Covid-19 March low. This stock to buy has also just entered oversold territory as evidenced by its stochastics indicator. I’m thinking the glass is half full. Appreciatively, there’s always room for some spillage from that glass, but my bet is on ‘the over’ heading into 2021.
Favored Strategy: Wager on a slightly riskier collar variation using a DraftKings Jan $35/$22.50 put spread that’s partially financed with a short Jan $50 call for this stock to buy!
Beyond Meat (BYND)
Source: Charts by TradingView
The next stock of our stocks to buy are shares of Beyond Meat. The green-friendly, faux meat sensation has its share of critics armed with plenty of warnings. Competition! China! Beef – It’s What’s for Dinner…yada, yada, yada.
Without being too preachy, the planet needs this type of food technology and so does a general population at increasing risk of bad health. I’ll admit the sodium is a bit high for my liking, but all things considered BYND’s product is a good tradeoff and bound to improve with future meat substitute introductions.
Technically, BYND stock is looking ready to nibble on today. Shares are currently testing trendline support. A purchase is backed by the 50% within the stock’s larger cup-shaped base, as well as a three-week pullback that’s 38% of this stock to buy’s rally from its March bottom to October high.
Favored Strategy: Sink your teeth into a Beyond Meat Dec $165/$185 bull call spread.
SPDR S&P 500 ETF (SPY)
Source: Charts by TradingView
The last of our stocks to buy is actually the market’s most liquid, broad and diversified instrument out there, the SPDR S&P 500 ETF. If it feels like a R.E.M. song right about now, you’re not alone. But when it comes to investing, those occasions can provide terrific periods for shrewd investors. There’s more too favoring a purchase of SPY in today’s market.
With the VIX, a.k.a. fear gauge, at a historically fearful and elevated 38%, betting on a wall of worry being successfully climbed has some obvious merit. As well and technically, buying SPY right now looks interesting as the market proxy is in position to establish a high-level double bottom or “W” pattern that’s challenging its year-to-date over/under line.
Is it the perfect investment? Nope, but that’s a popular fallacy anyways. To be fair, SPY does have a flaw or two. A bearish stochastics crossover inside neutral territory isn’t making the case for SPY as a stock to buy. Still, that condition can flip quickly. And from a contrarian perspective for the reasons discussed, the odds for a rally have improved.
Favored Strategy: Buy the SPY Nov $335/$345 bull vertical for a potential treat without getting tricked into holding the bag.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.