Stocks finished Tuesday within a whisker of new record highs. Led by a resurgence in tech stocks, the S&P 500 gained 0.40% on the session. But when you look beneath the surface, you’ll find buyers drove a dozen popular stocks higher by more than 4%. A select few even topped a 10% gain on the session. So after the bell, I waded through the biggest movers and found many breakout stocks to buy.
Today I’ll share my favorite three. Rather than going the lazy route and sticking with the top three gainers, I assessed the overall price trend to find the healthiest charts and patterns.
Two of today’s selections had specific catalysts behind Tuesday’s boom. Better-than-expected earnings played a role in one. Ambitious growth plans outlined by the CEO spurred the other.
While the final company didn’t show as much spunk, its long-term trend and proximity to a critical breakout zone demanded a mention.
That said, here are three hot stocks to trade now:
Let’s dig a bit deeper into the news and price action that support new buys.
Breakout Stocks to Buy: Qualcomm (QCOM)
Qualcomm shares were already riding high after reporting solid earnings numbers earlier this month. But buyers slammed the pedal to the medal after company executives painted a rosy future during investor day.
QCOM stock closed up 7.9%, with over 33 million shares changing hands.
CEO Cristiano Amon outlined plans for the semiconductor giant to expand into the automotive industry and the Internet of Things. Doing so will diversify the company’s revenue streams outside of mobile devices, allowing for other growth engines.
Investors lapped up the promising targets while buying shares hand over fist. QCOM shares are sitting at a record high and should continue higher in the weeks to come.
In the short run, a pullback would be welcome. With the earnings gap, prices have traveled a long way in a short period. For those that don’t want to wait, consider buying call spreads.
The Trade: Buy the January $180/$190 bull call spread for $3.90.
Microsoft (MSFT)
Microsoft climbed 1% to a fresh record amid strength in the tech sector.
Though not as eye-popping as the fireworks seen in Qualcomm, MSFT stock is a worthy candidate for new bull plays. It has a history of rewarding breakout buyers.
I’m particularly impressed by the brevity of last week’s pullback. Rather than a long sortie, sellers got a few shots off and then headed for the hills rapidly. And after such a lengthy upswing, you would have expected more profit-taking.
Shallow and short-lived retracements always echo a trend’s strength. Tack on year-end seasonality and the market’s current affection for all things tech, and we have a compelling case for higher prices. Call spreads are once again my strategy of choice.
The Trade: Buy the January $340/$360 bull call for $7.40.
Breakout Stocks to Buy: Home Depot (HD)
Home Depot brings up the rear of today’s breakout stocks to buy. Homebuilder stocks have been on fire this year, and even though Home Depot was up significantly for 2021, Tuesday morning earnings were still powerful enough to tack on another 5.7% in gains.
With the launch, HD stock completed a clean high-base breakout pattern. Volume swelled past 8 million shares marking the highest volume session since the last quarterly report. As a result, any backing and filling must be viewed as a buying opportunity over the coming days.
I hate to be a broken record, but I’m favoring bull call spreads given the hefty share price. It reduces the cost considerably, and implied volatility isn’t high enough for bull puts.
The Trade: Buy the January $390/$410 bull call for $8.
On the date of publication, Tyler Craig was long QCOM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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