Hobgoblins have arrived to spook stocks just in time for Halloween. A resurgent novel coronavirus and election jitters have investors de-risking portfolios and shedding exposure ahead of the weekend. And let’s not forget the lack of progress on the stimulus front. With negotiations stalled, the once-rising S&P 500 is tumbling back to Earth.
But against this grim backdrop, a select few securities are flexing their muscles. While their peers sink, these three stalwarts have soared. Each boast a unique bullish narrative and a powerful price chart. I offer them up as stocks to buy if you’re willing to bet the relative strength continues.
After the usual hot take on their chart patterns and a few words on the stories fueling their ascents, I’ll suggest a hand-picked options strategy to consider.
3 Stocks to Buy: Pinterest (PINS)
When it comes to stock to buy, earnings growth is the ultimate antidote for bears. It keeps naysayers at bay while providing a reason for buyers to swarm. In the case of Pinterest, booming earnings was the cause for Thursday’s celebration that launched PINS stock up 27%. The push to record highs came after the tech company posted a 58% year-over-year increase in total revenue.
Not six months ago, Pinterest was courting $15. Now it’s a stone’s throw from $70. In the short run, overbought conditions are cropping up. Indeed, profit-taking caused the stock to close $6 off the highs. Regardless, the strength of its overall uptrend demands any dips be bought.
I suggest watching for a pause or pullback to form over the coming days. Either development will create a compelling opportunity to deploy bullish trades.
Consider selling put spreads to capitalize, such as the December $53/$48 bull put for around 70 cents.
JD.com (JD)
August’s earnings report lit a fire under JD stock and it’s been burning bright ever since. Sure, the Chinese tech company saw a mild swoon in September, but it never breached any key support zones and ultimately was a pause that refreshed higher. Over the past month, a high base pattern has formed, creating a handle to the previous two-month cup.
On Thursday, an accumulation day ushered prices to the doorstep of a breakout. The long upper shadow revealed late-day selling that reinforces the significance of the $85 resistance level. Ultimately, that’s the zone that needs to be pierced to complete and confirm the cup-and-handle pattern.
Given the powerful trend propelling JD stock this year, it’s only a matter of time before the next up-leg kicks off.
To participate in a potential year-end run, buy the December $85/$90 bull call spread for around $1.90.
Nio (NIO)
2020 is turning into the ultimate turnaround story for Nio. This week’s surge demands I include it among top stocks to buy. The red-hot electric vehicle company has now traveled from $2 to over $30 in a little over six months.
What’s perhaps most impressive about the run is the consistency. You’ll often see a rocket ship stock like this experience sharp corrections along the way to scare the children and shake the weak hands out.
But NIO has done nothing of the sort. Each retreat has stopped dead at the rising 20-day moving average. We haven’t even touched the 50-day since April. And just as every dip has been bought, every breakout has delivered swift, easy profits.
Thursday was no different. NIO launched 16% in short order on explosive volume. It couldn’t be any more apparent that the stock cares not a whit about all of the drama weighing on the broader market.
I find it challenging to chase new entries here, particularly with earnings coming around the corner. I suggest lying in wait to snatch this one up into weakness. Naked puts pay a pretty penny, so that’s my play of choice if you want a higher probability of profit.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.
For a free trial to the best trading community on the planet and Tyler’s current home, click here!
