After a few quiet days in the market, we finally got some volatility on Thursday, with drama unfolding in the Middle East and Fed speakers hitting the headlines. That said, let’s look at a few top stock trades ahead of Friday.
Top Stock Trades for Tomorrow No. 1: Ulta Beauty (ULTA)
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Ulta Beauty (NASDAQ:ULTA) initially popped higher on earnings, but it’s just about flat on the session after fading from the highs.
Everyone but the technicians likely thought this one was heading higher. However, shares pushed right up toward the 161.8% extension from the first quarter of 2020 range — a major range — and faded from there.
It was a picture-perfect reaction.
From here, we need to see how the stock handles itself from here. Specifically, where does support come into play? Is it the 10-day moving average? Below could put the $355 area on the table, along with the rising 50-day moving average.
However, if Ulta can take out the post-earnings higher, $420-plus is possible.
Top Stock Trades for Tomorrow No. 2: Dollar General (DG)
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The dollar stores reported earnings and at the end of Thursday, Dollar General (NYSE:DG) won the battle. Shares opened considerably lower on the day, but ended the day down just under 4%. Compare that to the 12% decline in Dollar Tree (NASDAQ:DLTR), and DG stock looks much better.
After initially breaking below $220, shares snapped back over this mark and reclaimed $225. Now testing into the 50-day moving average, this area becomes critical.
If DG stock can stay above the 50-day moving average, it could go on to fill the gap up near $233.
If it can’t stay above it, though, the $220 level remains vulnerable. Back below that mark puts the post-earnings low in play, followed by the 200-day moving average.
Top Stock Trades for Tomorrow No. 3: Dollar Tree (DLTR)
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As for Dollar Tree, the action is much worse as the stock hits new 2021 lows. It’s clear that major support was forming near $97. That level held as support for the last several months — until today.
Unfortunately, that kind of puts the stock in no man’s land right here. For now, even the monthly moving averages are being broken, although perhaps DLTR stock will recover them by the end of the month.
On the downside, the 161.8% extension comes into play near $91.25. If it can’t find its footing there, then sub-$90 could be in play.
However, if shares can recover the $97 mark, the $100 level and the major daily moving averages could be in play. For now, though, DG stock is an easier read than DLTR stock — at least when it comes to the charts.
Top Trades for Tomorrow No. 4: Xpeng (XPEV)
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Lastly, we have Xpeng (NYSE:XPEV), which tried to rally on the day, but is seeing a painful reversal in development. At one point, shares were up 4% on the day, but it has since given up its gains.
Worse, this rejection comes after the stock momentarily cleared the 21-day, 50-day and 200-day moving averages.
Now we must keep a close eye on the $39.75 area. Below that puts XPEV stock below the post-earnings low, as well as all of its major moving averages. That could put a move down to uptrend support (purple line) in play, if not worse.
Some may even consider a move below this level as a short, with a stop just over the post-earnings high. For others, selling short a name like this isn’t even a consideration.
On the upside, though, we need to see XPEV stock clear the 50-day. Above that, and downtrend resistance is on the table.
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.
