We’re getting the typical volatility associated with a Fed Day, as stocks gyrate around the Federal Reserve’s commentary and asset-buying plans. So far, the reaction has been bullish, but we’ll need to see how we finish the week. That said, let’s look at some top stock trades ahead of Thursday.
Top Stock Trades for Tomorrow No. 1: AbbVie (ABBV)
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AbbVie (NYSE:ABBV) stock has been a solid performer from the fourth-quarter lows, ripping from about $80 to more than $100 by the end of the year.
Range support has been coming into play near $102, while bulls have had trouble sustaining price moves over $110.
Wednesday’s sharp decline has buyers stepping in near range support and the 100-day moving average. If ABBV stock loses Wednesday’s low, look for support at the 200-day moving average and the prior 2020 pre-coronavirus high near $98.
On the upside, however, I want to see shares reclaim its cluster of moving averages — the 10-day, 21-day and 50-day — near $107.50. Above that puts $110-plus in play.
So far, all we have here is a gap-down to support that’s holding as of now.
Top Stock Trades for Tomorrow No. 2: Treasury Bond ETF (TLT)
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What a washout we’ve been seeing in bonds lately, as the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) has been heavily crushed.
Shares bounced sharply in late February, but were met with resistance at the 10-day moving average. This measure rejected the TLT twice followed that bounce, with the second rejection leading to a sharp gap-down to the 200-week moving average.
The TLT broke that measure on Wednesday, although it’s bouncing off the lows. We’re talking about weekly levels, and so we should be measuring in dollars, not cents.
In any regard, let’s see how the TLT closes this week. Risky as it feels to be long down here, I like this name for a bounce provided it can close the week above the 200-week moving average.
If it can do that, the first target is the $138.50 gap-fill and the 10-day moving average. Above that, and the second target becomes $140 and the 21-day moving average.
Let’s see if we can get this name to bounce a bit.
Top Stock Trades for Tomorrow No. 3: Pinduoduo (PDD)
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Pinduoduo (NASDAQ:PDD) is rallying off the lows, but still finished Wednesday down 7.1%.
Shares are forming an interesting pattern, particularly with that healthy bounce off the lows.
We have a 1-2-3 pattern down to $136, with a solid bounce back up toward $170. Back below most of its moving averages now and struggling after earnings has investors wondering what the low will be on the longer term 1-2-3-4-5 pattern.
Without getting too detailed, we can either have a flat five-wave pattern — where the low comes into play near the bottom of the third wave (labeled with a “3” on the chart) at $136 — or we can have a lower low.
If it’s the first option, we need to keep a close eye on $136. A close below puts the $115 level and the 200-day moving average in play as a potential short-term low, (which could be the fifth wave, shown as a “5” on the chart).
For now, though, it’s great to see the 61.8% retracement hold, but it would be even better if PDD stock could reclaim the 10-day and 100-day moving averages. Above them puts $170 and the 21-day moving average back on the table.
Top Trades for Tomorrow No. 4: Five Below (FIVE)
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Five Below (NASDAQ:FIVE) reported its Q4 and fiscal year 2020 earnings after the close on Wednesday.
The setup was pretty nice going into the report. Five Below has been making a series of higher lows, but hasn’t been able to stay above $197.50. Known as an ascending triangle, let’s see if Five Below can clear $197.50 and break out over $200.
If it can do that, perhaps the two-times range extension up near $212 will be in play.
On the downside, however, I want to see FIVE stock hold the 50-day moving average and uptrend support (blue line). However, with earnings in play, that may be too tight of a leash for us to expect it to hold that mark.
If it loses these marks, I’d like to see shares hold the 161.8% extension near $180, but it needs to hold range support near $172.70 and the 100-day moving average.
On the date of publication, Bret Kenwell held a long position in TLT.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
