Bulls were sucker punched at the open on Tuesday, with tech taking a big blow in early trading. Although buyers were able to alleviate some of the pain, it was not an easy day. That said, let’s look at a few top stock trades for Wednesday.
Top Stock Trades for Tomorrow No. 1: QQQ ETF (QQQ)
Click to Enlarge
On Monday, I took a closer look at the S&P 500 and I figured today would be a good day for tech. For that, I’m looking that Invesco QQQ ETF (NASDAQ:QQQ).
Last week and on Friday specifically, the QQQ was doing a decent job of holding steady. The ETF continued to consolidate around its 10-day and 21-day moving averages.
Then, it tripped on Monday, and tumbled on Tuesday. For now, the dip is being bought. However, keep an eye on that 50-day moving average. Considering it hasn’t been tested since November, I’m surprised it didn’t act as better support. That’s especially true given how strong tech has been.
If the QQQ can’t reclaim this moving average, Tuesday’s low remains vulnerable. Should it break, I’m looking for a test of that $300 area and the 100-day moving average. You’ll notice a strong support zone in this level (purple box) that should at the very least alleviate some selling pressure in the short term — if we get there.
Above the 50-day, and bulls will want to see the QQQ reclaim $325 and press back up toward $330, although the road looks to have gotten a little bit more difficult for now.
Top Stock Trades for Tomorrow No. 2: Tesla (TSLA)
Click to Enlarge
Tesla (NASDAQ:TSLA) was knocking on the door of $900 last month. And if it weren’t for the 100-day moving average acting as support on Tuesday, it may have seen $600 on the day.
Shares are bouncing aggressively from the lows though. I had previously marked the $695 shorter-term breakout level on my chart, so I decided to leave it there. That breakout is what kickstarted the move to all-time highs and it seems to be acting as resistance on the day.
Above $700, and we could get an important test of the 50-day moving average and the prior $775 support level. Like the QQQ, the 50-day could be a key test (and again, I’m surprised it wasn’t better support given Tesla’s prior strength).
If we get some real selling pressure in Tesla, I’d love to see a retest of the $500 breakout level and 200-day moving average.
Top Stock Trades for Tomorrow No. 3: Snap (SNAP)
Click to Enlarge
Snap (NYSE:SNAP) is one of the few names that are in positive territory on Tuesday and is up notably at that, higher by 11.1% on Tuesday.
However, Snap suffered some large losses early in the session. Shares briefly broke the 10-day and 21-day moving averages before bouncing off the prior high and breakout level near $57.50.
Shares finished more than $10 apiece from that level in just today’s session — wow!
In any regard, I’d prefer to see Snap stock continue to hold the 10-day moving average as support. On the upside, it needs to clear the two-day high and the $67.50 to $68 area. Above $70 puts the 261.8% extension in play near $72.50.
Top Trades for Tomorrow No. 4: Macy’s (M)
Click to Enlarge
Macy’s (NYSE:M) has been all over the map lately. The stock rose from the dead in the fourth quarter, spiked violently in January amid the Reddit hoopla and has settled down over the last few weeks.
The good news? Shares are trading higher in an ugly tape and after reporting earnings.
Look at that beautiful hold of last week’s low, as Macy’s bounced hard off its lows of the day. That area — let’s call it $13.75 to $14 — is now our support level Macy’s needs to hold.
Below will put the 100-week and 50-day moving averages on watch. For now, let’s see that it also holds the 10-day and 21-day moving averages as well, since it took so much work to reclaim and hold them.
Clearing multi-week highs now, I’d love to see Macy’s climb back to $17.50 and challenge the 2020 high at $18.57. It filled that gap from 2019 at $18.86 last month, but if it can clear this level, it opens the door to the 200-week moving average, then the 52-week high at $22.30.
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.
