If Wall Street hates uncertainty, its prayers have been answered depending on where one looks. One thing is certain, though: this week is offering stocks to trade that bulls and bears can be more confidently thankful for on price charts serving up a potential smorgasbord of profits.
Unless investors have been self-isolating on a deserted island, news this week of Pfizer (NYSE:PFE) 90% efficacy rate for its novel coronavirus vaccine has been a huge deal both off and on Wall Street. And now, vaccinations could begin as soon as next spring. It is big news.
Yet, as much as the drug’s advancement is a celebration for the global population, one man’s relief is another’s misery. And the same is true when it comes to the stock market and stocks to trade.
Leaders during 2020’s historic climb out of a coronavirus-driven doomed bear market back in March didn’t exactly pop the champagne over Pfizer’s great news. Zoom Video (NASDAQ:ZM), Amazon (NASDAQ:AMZN), Costco (NASDAQ:COST), Netflix (NASDAQ:NFLX), Teladoc (NYSE:TDOC) and other pandemic beneficiaries were sent reeling.
By the same token, though, Carnival (NYSE:CCL), Delta (NYSE:DAL), Wynn Resorts (NASDAQ:WYNN) and other coronavirus “stay away” stocks were sent skyrocketing out of 2020’s relative and absolute price weakness.
So, what’s a stock investor to do? In our observation, it’s the same as it ever was. In a market made up of stocks and as the following three companies stress, exposure to stocks to trade long and short is simply best left to taking one’s cue from less-contested votes on the price charts now taking shape. They are:
Now, let’s dive in and take a closer look at each of these stocks to trade.
Stocks to Trade: Apple (AAPL)
The first of the top stocks to trade right now is Apple. Over the years, CNBC’s Jim Cramer has notoriously and correctly pounded the table for the world’s largest publicly-traded enterprise as a stock to buy for the long-haul. And now, as evidenced by AAPL stock’s price chart, it’s simply one to have for long-term exposure heading into 2021.
Technically, Apple shares have confirmed a higher pivot low within a corrective, high-level double bottom formation. Classically, this pattern confirms a buy when shares trade through the mid-pivot. But often enough, purchasing closer to support on weakness as the second pivot low develops makes sense.
Currently, I see this alternative approach as a compelling entry point to go long this stock to trade. And with this week’s Pfizer-driven price weakness, shares are back near the high of the lower pivot and have the support of a bullishly positioned stochastics indicator.
Favored Strategy: Long Weeklys ’24 December $122 / $130 bull call spread
The next stock of our stocks to trade is DraftKings. The online sports bookie was a big deal not too long ago with investors betting heavily on green. And they had an incredibly hot hand to be sure.
Nonetheless, what’s often forgotten in the excitement is all stocks eventually correct. And those bearish periods can be a good deal fiercer when the stock is driven by momentum that’s wagering heavily on lofty expectations for the future. Some DKNG stock investors recently found that lesson out the hard way.
Now, though, there’s reason once again to be optimistic.
After a steep 47% valuation reset over four weeks, shares have formed a bullish bottoming pattern. The weekly two candlestick reversal is sometimes called a Kings & Queens formation. No matter the name, the chance to own this stock to trade after a successful test of deeper trend support looks good for this up-and-comer. Also, DraftKings is set to deliver its third-quarter earnings on Friday morning.
Favored Strategy: Long January $35 / $50 collar
The last of our stocks to trade are shares of Boeing. Earlier, I hinted at a stock to short in the current market. But we’re finishing off with yet another stock to buy.
Turning a blind eye from BA stock’s solid price action to fit in a bearish hedge would be a disservice of sorts. Moreover, this out-of-favor, blue-chip stock can be viewed as protection in its own right given the past couple years of hot water the company has found itself in. That said, buying BA stock today is contrarian by nature.
Technically, this week’s price lift cleared a significant downtrend line within an emerging uptrend that’s formed since Boeing’s climatic coronavirus-driven low back in March. With stochastics on the monthly confirming a bullish reset on the illustrated weekly price chart, conditions are looking good. Therefore, BA stock is well-positioned for upside momentum into 2021.
Favored Strategy: February $155 / $225 collar
On the date of publication, Chris Tyler holds, directly or indirectly, positions in DraftKings (DKNG) and its derivatives, but no other 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.