It’s been said one day doesn’t make a trend. Still and following Tuesday’s forceful market signal, could another memorable March trade be in the works? In the following let’s explore three stocks to trade supporting a “same as it ever was” investment campaign that never goes out of style on Wall Street.
Patterns have a way of repeating or at least rhyming strongly in the stock market. Stocks that investors swear will never falter after a dazzling rally, only to crumble in a similar spellbinding way, form one of those tenets never quite learned. It happens all the time, including the last few weeks.
Many of 2020’s biggest winners have fallen precipitously over this period. They’re the ones which went from stocks to trade from the long side only to plain and simple butt ugly. Amazon (NASDAQ:AMZN). Shopify (NYSE:SHOP). Teladoc (NYSE:TDOC). Those are but a few of the casualties in a dime-a-dozen cratered landscape.
Were we collectively wrong to be optimistic? No. Did we get ahead of ourselves? Most likely. A rotation trade over this period has smartly lifted many of last year’s largest relative and absolute laggards. Delta (NYSE:DAL). Chevron (NYSE:CVX). Carnival (NYSE:CCL). And its suggests, along with today’s much-improved vaccination landscape, that we will make it through to the other side of the pandemic.
Today, it’s time to let bygones be bygones. Whether investors saw the warning signs of a fragile momentum trade and rotation in advance doesn’t matter. What’s important today is the net impact. With historically elevated levels of fear having returned to the market, meaningful corrections and once unloved stay-away Covid stocks having risen from the grave, it’s time to capitalize on another memorable March with stocks to trade.
Stocks to Trade: Tesla (TSLA)
Source: Charts by TradingView
The first of our stocks to trade are shares of Tesla. I’ve discussed TSLA in recent days as a buy and for good reason. There is, of course, the EV giant’s business. Almost inexplicably but appreciatively, Tesla crushed it during a pandemic. They’re everywhere for Christ’s sake! That alone is probably enough to be upbeat about. But there’s also today’s price chart in TSLA, which deserves investors’ attention.
Last year’s nearly 700% stock jump in Tesla shares has been augmented with a healthy and meaningfully stiff correction of 40%. Today and technically, the weekly price chart reveals an inside candle bottoming pattern that’s finding support off a critical price support backed by Fibonacci and trendline analysis formed over the past year. And with shares on the cusp of signaling a bullish oversold stochastics crossover, this stock to trade is one that’s readying to motor higher.
Favored Strategy: Modified April $775 call / ($600/$450 put) Collar
Desktop Metal (DM)
Source: Charts by TradingView
Desktop Metal is the next of our stocks to trade. As with TSLA, this one is a stock to buy. DM is a recent special purpose acquisition company or SPAC merger. An IPO alternative for taking companies public, SPACs earned some well-owned notoriety in 2020 with a smorgasbord of EV-related offerings. QuantumScape (NYSE:QS). Fisker (NYSE:FSR). Blink Charging (NASDAQ:BLNK). And that’s just the tip of the iceberg.
DM differentiates itself from the competition, though. First off, it’s in the 3D printing space. It’s also the only publicly traded pure-play Additive Manufacturing 2.0 company in the market. What’s more and also exciting is the man behind the curtain responsible for this stock to buy.
DM is the result of a reverse merger brought to life with key help from Chamath Palihapitiya, a well-regarded venture capitalist, engineer and early senior executive at Facebook (NASDAQ:FB). Today, his Social Capital partnerships are a working trust of philanthropists, technologists and capitalists out to create value and change on a global scale. Cool, right? I like to think so. And since DM may also prove a critical technology in fighting climate change, that idea is reinforced.
Since completing its SPAC on Dec. 10, 2020, this stock to trade exploded higher, only to implode under that enthusiasm. Today and with the momentum crowd long gone, shares of DM look well-positioned to rally out of an undercut double bottom pattern. With lifetime Fibonacci support from its partner’s Covid-19 bottom and stochastics in oversold territory, it’s time for bullish investors to print some money.
Favored Strategy: May $15/$25 Collar
Exxon Mobil (XOM)
Source: Charts by TradingView
Exxon Mobil is the last of our stocks to trade. Unlike our other choices, XOM is a stock to sell or short. After a substantial rally over the last five months, and one which most of Wall Street failed to see coming, XOM stock is likely to run out of gas.
Anyone familiar with my writing at InvestorPlace knows I’ve been a fairly staunch proponent of buying oil and gas names amid this past year’s popularized death-to-oil mantra and over-the-top fascination with alternative energy. Oil is still everywhere and not going anywhere anytime soon. But it’s time to use some of those proceeds or simply see XOM stock from a different – and much more questionable – angle today.
Bottom-line, all stocks correct. And those corrections often strike after big run-ups in price as the conversation shifts to what a great-looking story XYZ stock remains. TSLA and DM certainly make that point loud and clear. And now XOM’s overbought and parabolic-looking 100% gain since November, coupled with today’s weakened enthusiasm for alternative energy stocks, seems to fit this dictum as well.
Favored Strategy: Modified $55/$47.5/$42.5 Long Put Butterfly
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.