Small-caps continue to rule the world. Tuesday’s muscle-flexing from the little guys was yet another sign of rising risk appetite among investors. While the S&P 500 closed flat on the session, the Russell 2000 closed up 1.7%. The rotation was obvious, and my watchlist was chock full of big gainers on the session. So today, we’re looking at three of the best stocks to buy that were leaping higher.
My method of discovery was simple. First, I sorted my watchlist by percentage change to place the best in show on top. Then, I scanned the top twenty or so to identify the most compelling price charts. Bonus points were awarded for stocks just emerging from consolidation zones since they arguably have more room to run than those already up multiple days.
I even added in a potential bottom fishing play that’s starting to perk up.
That said, here are my favorite three stocks to buy among Tuesday’s big gainers:
Now, let’s take a closer look at their charts and layout an options trade to capitalize.
Top Stocks to Buy that Soared on Tuesday: Camping World (CWH)
Retail stocks are rocking as the economy reopening trade continues in force. Some are quite extended from low-risk entry points. Those were the easy ones to pass on. Camping World, on the other hand, just broke out from a six-month descending channel. It cleared its 50-day moving average as well, and looks poised for a potential run back toward its highs north of $40.
Its post-March recovery was epic and saw prices balloon from $3.40 to $42.49 in four-and-a-half months. So this is a stock that knows how to move. The next earnings report isn’t until mid-February, so we have plenty of time to play before the event.
Moreover, implied volatility is low at the 8th percentile. And it’s likely to rise over the coming weeks in anticipation of the earnings announcement. Both facts point toward buying a call spread.
The Trade: Buy the March $31.09/$35.09 bull call spread for around $1.60.
Uber is off to a booming start for 2021. After Tuesday’s moonshot, the ride-hailing company’s shares are up almost 16% on the year. Over 52 million shares traded yesterday, essentially adding an exclamation point to the breakout candle. High volume adds credibility to the breakout, making it all the more likely that it sticks.
We also have ample runway ahead of the earnings report on in February.
Oh, and did I mention that UBER stock is at an all-time high? Not a single shareholder on the planet is sitting in a losing position. There are no underwater longs desperate to recoup losses, nor are there any old resistance zones waiting to reject rally attempts. Both facts create a powerful tailwind for prices.
The theme of low volatility continues with implied volatility at the 12th percentile. Once again, I’m suggesting a call vertical spread.
The Trade: Buy the March $60/$65 bull call spread for $1.65.
Top Stocks to Buy that Soared on Tuesday: Zoom Video Communications (ZM)
When it comes to Zoom, some would say the bloom is off the rose. Since its epic, pandemic-juiced ascent finally topped last October just under $600, ZM stock has been almost cut in half. But if you’re a believer in its long-term prospects, and view the haircut as a much-needed de-frothing of its once sky-high share price, then this is a gift.
The 200-day moving average is fast approaching and should provide support. Many chart watchers anchor on this long-term smoothing mechanism as a potential buy point.
Tuesday’s high volume rally ended with a bullish engulfing candle enveloping the last few trading sessions. It’s a strong bullish signal that could be the start of a bottom forming. It’s also the reason why Zoom made the cut as the final of today’s stocks to buy. You could start to wade into the waters with long stock or buy call spreads. But if you want more confirmation, then wait for a close above the 20-day moving average.
The Trade: Buy the March $380/$400 bull call for around $6.60.
On the date of publication, Tyler Craig held LONG positions in ZM.
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