Yesterday the Federal Reserve delivered its verdict on policy changes for the next month. Fed chair Jerome Powell expressed his increasing concern over inflation. They dropped the term “transitory” from their statement, and they focused their attention completely on wage inflation. It seems that they are happy with their progress with the jobs recovery, as we are near maximum employment. This makes it harder to find stocks to buy at these levels.
But today I will do my best to find three more.
During the question and answer segment, Mr Powell did not specify an exact unemployment number that they were seeking. So for the next two months, the equity markets will remain hostage to report releases based around those data points. Once again, the company fundamentals on Wall Street play second fiddle to shock and awe in the news streams.
Nevertheless, there are absolute truths in the charts that help us navigate those treacherous waters. The goal is not to find perfect entry points, but rather reasonable ones. I’m always seeking situations that offer bigger upside opportunities than tangible downside risks.
This by default reduces my pool of candidate of stocks to buy to ones under selling pressure. Ideally I would like to see them reach prior bounce levels, because those levels are likely to offer support. One of my prerequisites is having strong fundamental basis for the company businesses. Sometimes we make judgment calls on those fronts especially with newer or adapting businesses.
Two of today’s three stocks to buy have such special circumstances. One is an old dog trying to learn new tricks. And the second is not even a company, but one that is even more exciting to trade. It’s worth noting the S&P 500 just made new highs, which brings external risks.
Regardless of how good each of the three stocks to buy are, we must consider the overall potential of corrections. The higher we go without one, the more likely we will get it — and the more likely it will be painful. Nevertheless, for now the bulls remain in complete control. Here are the three picks for today:
Stocks to Buy: Upstart (UPST)
First on the list is probably the most straightforward of the three stocks to buy. Upstart stock moves so fast that you definitely need Dramamine and a neck brace to trade it. This thing can move and wow, did it ever.
In the summer, out of nowhere, it burst into a 200% rally. Unfortunately for those who chased it too late, it ended with extreme pain. The correction came in two major waves. The first one settled above $300 per share and it looked like it was going to hold. However the reaction to the earnings report was horrendous, and it brought about the second wave.
Sadly that was even more violent and longer than the first. And it cost Upstart more than 50% of its value in just over a month.
Yesterday there was encouraging news however because UPST closed up 6%. Although one tick does not make a pattern, it does provide hope of stabilization. Furthermore, the zone below has highest volume that could be an opportunity for the bulls to hold. With the stock down in early trading today, though, we’ll need to see the buyers step back in first.
Those who are still long the stock may have missed the opportunity to panic out. Conversely, those who had wished they owned it on the way up can wade into it now in relative safety. The business is healthy and growing extremely fast. The stock, on the other hand, needs some time to prove itself on Wall Street.
Our second pick is BlackBerry — that’s the old dog trying to learn new tricks. I remember the days when headlines of its unique phones sparked excitement in the stock. Today’s BlackBerry is a new company altogether — or at least the talking points for it are. Very few investors completely understand its business, which makes it a sleeper stock.
Fundamentally, there’s nothing fantastic about its profit and loss statement. Sales are stagnant of late but much lower than five years ago. Net income is even worse.
However the prospects from here are going to be different. The company is in transition mode and its the story is more about intellectual property and software. This topic is vague enough that it’s not likely to be a detriment nor a selling point.
Therefore I reduced myself to only trading its chart assuming that the business is fine for now. The technical aspect is what we are seeking today, and the opportunity comes from the price patterns. BB stock is at levels that inspire support and reversion spikes. This call is for traders more so than investors, although both have reason to trade now on different time frames.
The trader in me wants to own it with some apprehension. After all, it will report earnings soon and that is another layer of uncertainty that I don’t necessarily like. Technically there are buyers below and opportunity above. The biggest resistance level is not until over $10.50 per share. That’s a lot of runway ahead for the bulls with the right momentum.
Since this is a trade for me, I would stop out if it loses this week’s low. The investors who believe in it long-term may also be correct on that front as well. I have traded the stock before and I would warn against overstaying welcome in winning trades. It has a nasty habit of flipping on a dime and taking it right back out of your hands. Book them while you have them.
Cryptos to Buy: Cardano (ADA-USD)
Last but not least is Cardano’s coin, ADA-USD. I am confident that the world absolutely needs crypto. Therefore my assumption is that in the long run, the coins that support viable use cases will be winners. This includes Ethereum (CCC:ETH-USD), Cardano and Solana (CCC:SOL-USD). Not that the other ones are garbage, but these are the three on my immediate radar.
I am already long SOL-USD because I cannot stand the fees I pay in Ethereum. Something else must come up and challenge it to reduce those costs. Cardano is also one of those competitors and ADA coin is now compelling to buy.
Yesterday, my alerts fired off signals to add positions to my crypto wallet. I have traded it before from a slightly lower level. However this is the zone where I am willing to go for a repeat performance. My prior trades delivered more than 30% profits in a relatively short period of time. I don’t expect as good a result in the short term, but this should be a good start.
Crypto is a new venue for most investors, so they should respect it by taking small positions at a time. I bet success will depend on how patient they are. Otherwise they must be traders and set specific entry and exit points to increase the odds of success.
I get so excited when I debate crypto because the antagonistic arguments are easy to refute. But the longer the skeptics hold out, the bigger the opportunity is for the early birds delving into it. ADA-USD would make for a fine addition to a portfolio at these levels.
On the date of publication, Nicolas Chahine 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.
Nicolas Chahine is the managing director of SellSpreads.com.