The markets continue its slow grind higher, but we’re seeing pockets of explosiveness. Specifically, the short-squeeze trade has been heating up this week. That said, let’s look at some of these candidates for our top stock trades.
Top Stock Trades for Tomorrow No. 1: AMC Entertainment (AMC)
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AMC Entertainment (NYSE:AMC) has become completely disconnected from reality. It took a while — months, actually — for these Reddit stocks to finally catch fire again. But they are igniting to impressive heights.
Not long ago, I was pointing out AMC’s tangle with the 61.8% retracement near $14.50. Shortly after, shares had doubled in just a few days. At one point on Wednesday, the stock was up more than 100% for the session.
The rally has been breathtaking, even though it’s also insane. It’s also a great lesson on why shorting these types of stocks can be a total disaster. Being short AMC stock at $15 last week is now a 400% loss.
As shares blast into the four-time extension measures — the 423.6% and the 461.8% extensions — I would be booking at least some, if not all, profit on long positions. Maybe we see a bigger squeeze in the coming days or weeks, but investors should want to lock up some of these mega gains.
Top Stock Trades for Tomorrow No. 2: Bed Bath & Beyond (BBBY)
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The short-squeeze trade is spilling over into other names too, like Bed Bath & Beyond (NASDAQ:BBBY). Interestingly, this was my top pick for this year’s Stock of the Year contest with InvestorPlace.
I didn’t know this type of price action would soon follow the call, though.
With today’s rally, BBBY stock climbed to the 61.8% retracement near $42. If we get a push above this measure, the upper $40s are possible. Above $50, and the January high near $54 is possible.
On the downside, though, I want to see $33 act as support. This prior resistance level kept a lid on BBBY stock a few months ago.
Top Stock Trades for Tomorrow No. 3: GameStop (GME)
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Given all this talk of Reddit short squeezes, some of you are probably wondering about GameStop (NYSE:GME).
The leader in this movement has done well lately, but it hasn’t been the highlight of the current act. That belongs to AMC. For GameStop’s part, shares rallied up to the March resistance zone between $280 and $300.
If it can’t break through this area, see if the 10-day moving average and $210 area act as support. In the event that they don’t, the 50-day moving average and uptrend support (blue line) could be in play.
If GameStop does break through $300, it could quickly put $348.50 in play, followed by a possible move to $400.
Top Trades for Tomorrow No. 4: Hewlett Packard Enterprise (HPE)
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Hewlett Packard Enterprise (NYSE:HPE) isn’t giving bulls much to work with after reporting earnings, as it’s roughly flat on the day.
I would love a calm couple of days to finish the week. That would give this stock a nice little rest after a powerful rally. Specifically though, I would love to see the stock finish the week above the 10-week moving average but below $16.23.
That could set up HPE stock for a weekly-up rotation next week.
On a move below $15.62 — the May low — we could have a monthly-down rotation. That could put the 21-week moving average in play.
On the date of publication, Bret Kenwell 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.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
