After weeks of dozing, the sleepy stock market has finally awoken. Trends that were in place are reversing, and new themes are emerging. For example, while the inflation trade has cooled, growth stocks are heating up. And thank goodness for that. Last week could have been much worse if not for the Nasdaq’s strength.
Led by the technology sector, the growth area of the market has benefited from traders ringing the register in value stocks.
If you think the outperformance is likely to persist, then there are opportunities aplenty. I scoured the tech sector in search of the best patterns to play and found three popular stocks that have recently started trending higher. The lot of them should continue to climb if the recent sector rotation continues.
My growth stocks to buy today are:
We’ll follow our usual course with a brief rundown of each chart followed by an options trade.
Growth Stocks to Buy: Apple (AAPL)
Apple shares entered last week as flat as a pancake. Prices were stuck in a narrow trading range between the 50-day and 200-day moving averages, which themselves were traveling sideways. It’s the type of posture that defines neutrality and provides little hope for directional traders.
But on June 14, everything changed.
AAPL stock scored an upside breakout on high volume. The breach was followed by two more accumulation days to add further confirmation. With the jump, prices are now trending higher above all major moving averages. Thursday’s strength was particularly impressive given the damage being inflicted elsewhere in the market.
Prices retreated on Friday, so I suggest waiting on a break of a previous day’s high before pulling the trigger.
The Trade: Buy the Aug $130/$140 bull call spread for around $3.80.
It’s been a long time since Amazon looked interesting. For nearly a year now, prices have been pinned near $3,200. On the bright side, earnings have increased substantially along the way, dramatically reducing the company’s valuation. The recent growth stocks awakening breathed new life into Amazon, and it’s now testing the top end of its range.
Volume patterns are providing a reason for confidence too. Four accumulation days have cropped up over the past two weeks, revealing institutions are returning to the fray. Their participation increases the likelihood that the imminent breakout will have legs.
With prices slightly overbought in the short run, some backing and filling wouldn’t be unwelcome. Keep an eye on $3,550. It’s the level that needs to be taken out to signal Amazon is finally departing its trading range.
The Trade: Buy the Aug $3,600/$3650 bull call spread for around $17.
Growth Stocks to Buy: Advanced Micro Devices (AMD)
For the final of our growth stocks, we’re going to the semiconductor industry. Chip stocks have been out of favor for a while, but we’re starting to see some promising signs. Based on what happened this week, Advanced Micro Devices is one of my favorites. On Thursday, the company announced a deal with Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). Alphabet will offer cloud computing services based on data center chips from AMD.
Investors cheered the news by sending AMD up 5.6%. Over 77 million shares changed hands on the session, marking its highest volume day since April’s earnings report. With the trend now pointing higher and prices above the 200-day moving averages, traders have a green light for bullish plays.
The Trade: Buy the Aug $85/$90 bull call for $1.80.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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