As the saying goes, these are interesting times we live in. And those words certainly resonate right now. But when it comes to investing and the stock market, rest-assured and always, trillion-dollar companies are great stocks to trade, while everything else is just background noise.
It’s been a crazy year. As a species we’ve been greatly challenged by Covid-19. Thankfully and if there’s any comfort to be had, technology from outfits such as Zoom Video (NASDAQ:ZM), Teladoc (NYSE:TDOC) and Peloton (NASDAQ:PTON) among others, have helped make a still painful pandemic, less so for many of us.
The past 12 months have also proven a zany one for the stock market. Companies like the aforementioned unsurprisingly enjoyed rocket-like rallies out of last March’s near-universal bear market bottom for risk assets. But those select businesses were far from alone and oddly enough, not even the stars of the show. There were other and even better stocks to trade.
In a period when business and government ordered work-from-home and stay-at-home decrees became part of daily life, astonishingly enough it was a wave of electric vehicle stocks led by Tesla (NASDAQ:TSLA) and it’s near 700% rally which took home even larger trophies. But today is today. QuantumScape (NYSE:QS). ChargePoint Holdings (NYSE:CHPT). Fisker (NYSE:FSR). The list goes on and on and what it says hasn’t been pretty.
Much of the leadership which fueled 2020’s stock market to startling gains and record highs have been replaced by more defensive blue-chip and value-oriented investment decisions over the past couple to few months. Caterpillar (NYSE:CAT). Home Depot (NYSE:HD). Chevron (NYSE:CVX). They’re all the rage again. However, if history is to be respected, today’s dearly held and recent rotation may also find more challenging conditions ahead.
So, what’s an investor to do? If history has taught us something else, it may be a good time to look past Wall Street’s flavor of the day. On that note and removed from today’s siren song, let’s explore some of the market’s other leadership, those heavyweight’s price charts and appreciate which stocks to trade, also offer a better investment edge.
Stocks to Trade: Apple (AAPL)
The first of our stocks to trade are shares of Apple. The tech giant and world’s largest company currently sports a valuation of $2.13 trillion. But the price chart suggests today’s market capitalization could be closer to a floor than ceiling.
Technically and as the illustrated monthly chart reveals, shares of AAPL are closing in on a doji candlestick signal. A pattern buy decision is just north of 1% from current prices at $128.72. And with the highlighted pattern forming the basis for a healthier, slower moving uptrend, this stock to trade is well on its way to being a certain stock to buy once more.
Favored option strategy: May $145 call / $120 put collar combination.
Amazon is the next of our stocks to trade. More than Zoom Video, Peloton or Teladoc, most of us could not have survived the past year without this tech giant’s array of essential and non-essential goods and services. Today and appreciatively, AMZN shares are well-positioned for investors to take delivery of the stock, while Jeff Bezos can further distance himself from the pack as the world’s richest person. Well, maybe. Elon Musk’s TSLA may have a say in those matters.
Technically, AMZN stock has put together a bullish double-bottom pattern. Hammer candlestick confirmation occurred Monday and follows a twice failed triangle formation which proved equally tough on bulls and bears. Along with a neutralized stochastics indicator and follow-through above the triangle’s boundary lines for a third time, conditions are looking durably more charming for bullish buyers.
Favored option strategy: July $3500/$3900 bull call spread.
Alphabet (GOOGL, GOOG)
The last of our stocks to trade are shares of Alphabet. Unlike our other trillion-dollar companies, this tech giant’s massive $1.5 trillion valuation is at increased risk of profit-taking and potentially a larger correction. As much, GOOGL stock isn’t a purchase at current levels.
That’s not to say it’s a short though. It’s not.
Technically, a sturdy trend since last March’s Covid low has become increasingly risky based on an overbought stochastics and GOOGL’s candlestick positioning above the upper Bollinger band. The saying, “the trend is your friend” doesn’t apply here as today’s buyers are way late to the proverbial party.
Bottom line and for the time being in this stock to trade, it’s time to reduce risk on existing long Google positions with a collar or by selling shares. And for those looking to buy GOOGL? My best guess is better opportunities look a good deal more approachable closer to basic and healthier trendline and Fibonacci support from approximately $1,750-$2,000.
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.