With Tuesday’s epic rebound from the Nasdaq, it appears the bottom is in. To celebrate the potential end to the market correction, today’s gallery spotlights the best-looking stocks to buy.
Rather than focus on a particular sector or industry, I took the diversification route. My offerings below include a copper stock, an automaker and a semiconductor company. The first provides exposure to the raging commodity bull market—the second taps into the EV movement’s power. And the third exploits the rebound we’re seeing in chip stocks.
From a pattern perspective, two are breakouts, and the third is a bull retracement.
Let’s take a closer look at each chart and build out an options trade.
Stocks to Buy: Freeport-McMoRan (FCX)
Nowhere is the flood of money into commodities more apparent than with copper. What started as a trickle in 2021 turned into a flood come February. The rip quickly carried copper futures from $3.50 to nearly $4.50 in a single bound. The pullback we’ve seen since is creating a compelling buy-the-dip setup.
For stock traders, Freeport-McMoRan is the way to play it. FCX stock has a high correlation to the metal and has been booming since last March. Since notching a new 52-week high last month, prices have retreated in an orderly fashion. All we need now is an upside trigger to signal the next advance has begun.
If FCX rises above $35, then new bull trades have a green light. Naked puts are my preferred way to play. The stock’s low price tag creates a tasty return on investment.
The Trade: Sell the April $28 put for 50 cents.
General Motors (GM)
The electric vehicle movement has done wonders for General Motors. The company’s willingness to adopt the future has turned its stock from a rusty old automobile into a sleek growth stock. GM entered 2021 with a bang, leaping from $40 to north of $55. Since then, a sideways base has formed, allowing the 50-day moving average to play catch up.
With this week’s stock market comeback, GM is now pushing into the top end of the range, making an upside breakout imminent. $57 is the level to watch. Breaching it will complete the base and confirm the next advance is upon us.
The Trade: Buy the April $55/$60 bull call vertical for $2.10.
The max loss is $2.10 and will be forfeit if GM sits below $55 at expiration. The max gain is $2.90 and will be captured if the stock rises above $60.
Applied Materials (AMAT)
Semiconductor stocks have been at the epicenter of all that ails the market. As one of the technology sector’s core growth engines, it suffers anytime the Nasdaq falls out of favor. While the tech trend remains lower, Tuesday’s ramp offers a reminder that bulls aren’t going down without a fight. If we see further upside follow-through, then I’m interested in looking for trades to capitalize.
AMAT stock held up far better than its peers during the recent drama. And that makes it a worthwhile inclusion to today’s stocks to buy. While the lot of them sliced below the 50-day moving average, Applied Materials shares did not. And, with this morning’s push, prices moved north of the 20-day moving average. Stocks that hold up best during corrections are those that typically lead coming out of them.
That makes AMAT one of my top picks for those shopping semis. Implied volatility is low at the 14th percentile making bull calls a smart play.
The Trade: Buy the June $120/$130 bull call spread for around $3.30.
You’re risking $3.30 to capture $6.70 if prices can rise beyond $130 by expiration.
On the date of publication, Tyler Craig held LONG positions in FCX.
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