It was as a tough day in the stock market on Monday, with the S&P 500 and Nasdaq both getting rolled. No progress on the stimulus deal, rising novel coronavirus cases and pre-election volatility aren’t helping matters. With all of that in mind, let’s look at a few top stock trades.
Top Stock Trades for Tomorrow No. 1: SAP (SAP)
Even before SAP (NYSE:SAP) reported earnings, shares were looking a bit wobbly. After a powerful move to new highs this summer, shares began trading in a downward channel.
Monday’s gap down was monstrous, a move we don’t usually see out of a name like SAP. In fact, it was the stock’s largest single-day decline in almost thirty years.
However, the stock is declining right down into its 200-week moving average. Will that be enough to stabilize the stock? Perhaps not during such a volatile period, although it has been support in the past.
If it fails, the $95 to $100 area could be next.
On the upside, a move through $125 could put the 50-week moving average back in play up near $135.
Top Stock Trades for Tomorrow No. 2: Caterpillar (CAT)
Caterpillar (NYSE:CAT) stock has been on fire, roasting to new highs in recent trading. With earnings on deck for Tuesday, though, investors are de-risking a bit.
On a bearish reaction to earnings, see that the $145 area acts as support, provided the 50-day moving average gives way first. This would be an excellent buy-the-dip candidate if support holds where it’s supposed to.
There the stock will find the prior 2020 highs from the pre-coronavirus days, as well as a key level from late summer. On the upside, we need to see Caterpillar stock close above $170.
That could put the 161.8% extension in play up near $183. Above opens the door to $200, but let’s not get too bullish here.
Top Stock Trades for Tomorrow No. 3: Hasbro (HAS)
Hasbro (NYSE:HAS) reported earnings on Monday morning, with shares moving lower by about 9.4% on the reaction.
Some may be tempted to buy the stock as it pulls back into the 50-day moving average. By all means, if you love this name, it’s 10% cheaper than it was a day ago, so it may be worthwhile.
From a trading perspective — and as volatility ramps up a bit — I want a better risk/reward. In that case, I’m looking at the $78 area. There it finds the 100-day and 200-day moving averages, with the former having been strong support over the past few months.
Our risk level can be $75, which were the September lows. A clear break below this mark and the long trade is likely off the table. On the upside, let’s see if we can get a push through $90 resistance.
Top Stock Trades for Tomorrow No. 4: 3M Co (MMM)
3M Co (NYSE:MMM) will also report earnings on Tuesday before the open. Like Hasbro, the 100-day moving average has been acting as solid support over the past few months.
A break of this area likely puts the 200-day moving average in play, but if that’s the case, I’d rather a dip down to $150. That level of range support has been more dependable since June — not the 200-day moving average.
We’re open to that development changing, but that’s been the case thus far. A break of $150 is a bad look for MMM.
On a bullish reaction, let’s see if shares can clear this $174 area. That was resistance in September and October. Above would put the pre-coronavirus 2020 highs in play near $177.50, followed by a possible move to the 123.6% extension near $193.
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.