Stocks were flying on Tuesday as stimulus talks inched ever closer to the finish line. Is this a recycled catalyst? You bet. But in an environment such as this, where bulls reign supreme and the market trend is pointing higher, virtually every headline is viewed as a reason to buy. News follows price, not the other way around. A select few tech stocks found themselves among the top gainers on the session.
If you think the steady drumbeat of new highs means the only way to participate is to chase stocks already in the stratosphere, then you’d be wrong. Sector rotation has allowed some areas to cool while others heat up. Then, before long, the script flips. And what was out of favor becomes in.
Here are 3 stocks to buy that are waking up
Today’s gallery is all about highlighting a sector that may have lagged for a spell but now offers some real potential. Tuesday’s rally breathed new life into the following tickers, creating upside breakouts. And that makes them all compelling stocks to buy.
3 Tech Stocks to Buy that are Waking Up: Apple
Believe it or not, Apple has gone essentially nowhere since August. The rest was well-deserved, born out of overbought conditions and a market that saw the entire tech sector lag for months.
But ever since October’s earnings report, a mini-me uptrend has carried prices to the top end of the recent range above both the 20-day and 50-day moving averages. Along the way, we’ve seen a subtle change in tone on the volume front. The past two upswings saw accumulation days signal institutions were returning. Yesterday’s high volume jump was particularly impressive, carrying AAPL to a fresh three-month high.
If you think the rotation into tech stocks could continue, then Apple is one of the sector’s best picks.
The Trade: Buy the Feb. $135/$140 bull call for $1.40.
The past six months haven’t been kind to eBay. While the rest of the market is courting new records, EBAY stock has declined as much as 26%. But there’s a silver lining.
Since last month’s successful test of the 200-day moving average though, the technicals have turned. Yesterday’s 5% pop created a higher pivot low while jamming prices through the 50-day moving average for the first time since mid-October.
Meanwhile, distribution days have disappeared and reflect the heavy selling pressure that held prices lower last month is now gone. Throw it all together and we have an upside trend reversal on our hands.
Implied volatility is low, making long calls or call spreads the obvious choice.
The Trade: Buy the Feb. $55/$60 bull call for around $1.20.
First Solar (FSLR)
Solar stocks peppered the leaderboard on Tuesday with large gains across the industry. Of the biggest names in the space, First Solar has the most compelling price chart. It ended the session with a powerful bullish engulfing candle right at the rising 50-day moving average. That allowed the intermediate-term uptrend to remain intact while setting the stage for a potential run to $100.
That’s the logical upside target I will use for today’s trade idea. Yesterday’s low is a smart level for a stop loss. Breaching it would signal a change in trend, as well as a failure of Tuesday’s huge reversal candle.
FSLR has the highest implied volatility of today’s three tech stocks, so let’s switch up the trade idea to a bull put.
The Trade: Sell the Jan. $82.50/$77.50 bull put spread for 90 cents.
On the date of publication, Tyler Craig had LONG positions in AAPL.
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