President Donald Trump sent a shot across the bow Tuesday. In a weaponized tweet, our commander-in-chief pulled out of stimulus talks until “after the election.” He has since walked back on that for individual payments. But stocks, which had been running hot on hopes for the next round of cash injections, took a nosedive. A select few held firm during the selling barrage, though. And that makes them perfect stocks to buy if you’re seeking strength.
Spotting outperformance on a day like yesterday is easy. All it takes is sorting your watchlist by percentage change and looking at the top gainers. For a session where nearly everything ends in the red, the handful of darlings still green by the end of the day are the obvious leaders.
I care less about why they led, but a prominent theme tying today’s trio together is they’re all tech stocks.
Let’s take a closer look at Tuesday’s session. Then we’ll map out a way to profit from the continued resilience.
3 Stocks to Buy: Twilio (TWLO)
Twilio gapped higher on Friday after the cloud company released preliminary sales results for its third quarter. The expectation-beating numbers encouraged buyers to bid TWLO stock to the moon. By day’s end, nearly 14 million shares traded, and the price rose 13%.
Profit taking struck Monday, allowing the stock to catch its breath for another run to the moon. The minor volume on the session helped confirm the selling pressure was minimal. Yesterday saw buyers return in force. Despite the late-day broad-market selloff, TWLO was able to close near the high of its session. It’s a good omen and tells me the stock wants to move higher.
Implied volatility is at the 45th percentile of its one-year range, and makes short options strategies compelling. If you’re willing to bet TWLO sits above $250 at November expiration, then enter the following.
The Trade: Sell the Nov $250/$240 bull put spread for $1.95.
Do you know what suggests a stock doesn’t care about a Trump tweet? Blasting to a new record while the rest of the market is sinking. Tuesday’s close of $232.49 marks a new high water mark for Okta. The San-Francisco-based software company has boomed during the Street’s ongoing love affair for seemingly every stock connected to the cloud.
Yesterday’s clearing of resistance officially signals the end of its four-month range. Breaking from long-term bases is the ultimate bullish signal. The balance of power has finally shifted back to bulls, and I see no reason why we shouldn’t bet on their newfound advantage.
The stock’s higher price tag and implied volatility rank of 29% make me lean toward buying vertical call spreads. They’re cheap and offer a simple directional bet.
The Trade: Buy the Nov $240/$250 bull call spread for $4.15.
Nvidia rounds out our trio of stocks to buy with a gorgeous uptrend. Its gains faded by the close Tuesday, but it was still able to close in the green. Furthermore, it’s jumping higher right out of the gate today. I think a push to $600 is all but inevitable.
NVDA stock has been the envy of the tech sector throughout 2020. It’s a giant with one of the most consistent uptrends on the Street. All major moving averages have been trending higher throughout the year, and we’re currently well-positioned above them all.
I’m sticking with my bull call spread theme. We can build an extremely low-cost position for such a high-priced equity.
The Trade: Buy the Nov $590/$600 bull call for $3.80.
On the date of publication, Tyler Craig held LONG positions in TWLO.
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