All four major U.S. indices hit new all-time highs on Wednesday, but a quick midday reversal sent the market reeling. For now, the trend is still intact, but traders are on guard. With all of that in mind, let’s look at a few top stock trades for Thursday.
Top Stock Trades for Tomorrow No. 1: Chewy (CHWY)
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Chewy (NYSE:CHWY) fell 4.5% on Wednesday, and it’s had a pretty wild trading day. Given the action in the overall market, though, that’s not too surprising.
The stock opened slightly lower, before testing its 10-day moving average. This mark has been support for nearly a month. Then shares rallied to new all-time highs before pulling back.
So, now what?
With support in place, bulls don’t need to panic. They don’t really need to be too concerned so long as the stock maintains above the $70 to $72 area. Below, and that may usher in a test of the 50-day moving average, which has been support for several months now.
On the upside, though, look to see if Chewy can take out its new high near $82.50. That could put the 161.8% extension from the September low to the preceding all-time high in play at $89.42.
Top Stock Trades for Tomorrow No. 2: GameStop (GME)
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GameStop (NYSE:GME) isn’t having as good of luck on the day, with shares down more than 19% on the day.
The bearish reaction to earnings has been met with buyers at the 10-week moving average.
If this mark holds as support, first see if the stock can reclaim the $16 level. That will essentially fill the post-earnings gap, as well. Above that and the 2020 high is possible at $19.42.
On the downside, however, a loss of the 10-week moving average could put the 200-week moving average in play near $11.15.
Top Stock Trades for Tomorrow No. 3: Adobe (ADBE)
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It’s a decently busy week of earnings, with Adobe Systems (NASDAQ:ADBE) set to report after the close.
Like the rest of tech, Adobe surged to its 2020 highs in late August and early September. However, it faded hard and quickly after doing so. It was followed by lower highs in October and November, while higher lows in October and November have allowed a wedge pattern to form (blue lines).
Currently its holding up over wedge resistance, as well as the 10-day and 50-day moving averages.
On a bearish reaction, look for wedge support to buoy Adobe near $470, assuming it loses the levels we just discussed. Below $470 could eventually put the November low on the table near $440, although $460 has been notable as well.
On the upside, though, I’m looking for shares to rotate over the November high at $502.53. Above that puts the October highs on the table near $520, followed by the all-time high at $536.88.
Top Trades for Tomorrow No. 4: RH Inc (RH)
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Give yourself a pat on the back if you’ve been long RH Inc. (NYSE:RH) for any meaningful time since the April lows.
From that point on, RH stock has been a total freight train. The stock even hit a new high on Wednesday ahead of its earnings report after the close.
For now, the stock continues to hold its 10-day moving average. That has allowed RH stock to drift higher and higher without a worry. On a dip, look for the $400 mark to hold as support. Not only was this a key breakout spot in November, but it’s also where the 50-day moving average comes into play.
On the upside, the 261.8% extension from the March low to the February high — which is crazy it’s only the 261.8%, by the way — is all the way up at $552.59. Over $500, and that will likely become bulls’ new target.
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.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
