Stocks are sinking today, but large caps are faring much better than their smaller brethren. While the Russell 2000 Index is off 1.2% this morning, the S&P 500 is down 0.38%. Given the relative strength of blue-chip stocks, I’m sharing three of the best for those seeking smart trades.
Today’s candidates also have three of the most recognizable brands on the planet. That alone makes them popular stocks to follow. And their larger market caps make them all stable trading vehicles. These aren’t high-beta gunslingers. They’re lower volatility, mature companies.
The biggest reason I’m bringing them to your attention is that they boast clean price charts with easy buy points. So, without further ado, here are three blue-chip stocks to trade:
After breaking down each chart, I’ll offer an options trade.
Blue-Chip Stocks to Buy: Walt Disney Co (DIS)
Disney shares peaked in early March and have been floundering ever since. But I’d be lying if I said the past two weeks of price action hadn’t caused me to upgrade my bias. With yesterday’s high volume rally, DIS stock formed its third straight higher pivot low since its earnings report. The gradual rise is also pulling the 20-day and 50-day moving averages higher. Previously they were stuck in a sideways drift.
Today’s market selloff thwarted Disney’s breakout attempt over $186 resistance for now, but I think it’s just a matter of time before the ceiling gives way. So if you want more confirmation before pulling the trigger on the bullish trade idea below, then this is the level to watch.
If you’re willing to lean long here, but want a higher probability path to profits, then bull put spreads are the way to go.
The Trade: Enter the October $175/$170 bull put spread for 85 cents.
Consider it a bet that DIS sits above $175 at expiration.
Two things caught my eye in McDonald’s this morning. First, shares of the fast-food giant were holding strong in the green while the rest of the market was melting lower. Second, its price has been extremely stable over the past six months, with a symmetrical triangle forming over the past two.
What’s more, with overhead resistance at $240, there’s an easy line in the sand to use for triggering into bullish trades if you want more evidence of upside before piling in.
The gradual-moving nature of MCD stock makes it a prime candidate for covered call trades. Since the share price is so high, we can build a poor-boy version using options. The strategy is also known as a bull call diagonal spread.
The Trade: Buy the November $230 call while selling the October $240 call for a net debit of $9.
You should be able to capture a $1.50 to $2.50 profit if MCD sits at or above $240 at expiration.
Blue-Chip Stocks to Buy: Ford (F)
The final blue-chip stock for today is Ford. Its share price is well off this year’s highs and offers a lower-risk entry point. I particularly like how it’s coming into some major long-term support zones. Multiple pivot points have formed near $13 over the past few years, so this is a logical area for buyers to return.
But with prices still below the 20-day moving average, some upside mobility is needed before pulling the trigger. I like waiting for a push above $13.30 to signal bulls are reversing the trend higher.
Given Ford’s ultra-cheap price tag, I don’t see much reason to fiddle with an options trade if you want to go directional. Instead, buy shares once we take out resistance.
On the date of publication, Tyler Craig was long DIS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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