The wicked game of ping-pong continues Monday morning, with prices roaring back after Friday’s beatdown. If you’re tired of the back-and-forth and want some top stock trades to consider that have been largely ignoring the volatility, then today’s picks are for you.
All three boast strong trends, relative strength, and clean price patterns. It’s a trifecta of bullish signals that make them compelling ideas for profit-seekers.
I’ll unveil the tickers in a moment, but first, a word of caution on today’s rally. I remind you that we’ve seen this movie before. The last three times the market ripped higher, sellers inevitably returned in force.
For this rebound to be different, we desperately need follow-through. A second or third up day will help confirm a change in character.
Let’s take a closer look at each.
Top Stock Trades: Chevron (CVX)
In recent weeks, the sharp decline in oil prices had investors fleeing from energy stocks. But some oil companies held firm during the departure. Chevron was one of them.
Here’s one way to illustrate the strength. At $69, crude oil is approximately 20% off its high. The Energy Sector ETF (NYSEARCA:XLE) is perched at $56.50 and 4.9% off its peak. Meanwhile, Chevron is down less than 1% from its high.
The energy sector is outperforming crude oil, and Chevron is outperforming the energy sector. That, friends, is the definition of relative strength.
Over the past month, CVX stock price has built a sideways base. With this morning’s 2.5% rally, prices are on the verge of breaking out. This is a resistance breach you want to be buying. Consider using call spreads.
The Trade: Buy the January $115/$120 bull call for $2.60.
You’re risking $2.60 to make $2.40 if Chevron can rise beyond $120 by expiration.
Procter & Gamble (PG)
In times of turmoil, money tends to flow into defensive sectors like utilities and consumer staples. The rotation benefits companies like Procter & Gamble. Indeed, its share price is leaping to a new record as I type. I could do the exact rundown as Chevron and compare PG to its sector and the market, but suffice it to say, it’s handily beating both.
Prices are rising above all major moving averages, and the new highs should bring new buyers to the yard. Because of the gradual nature of the uptrend, I like mildly bullish strategies here over aggressive ones.
A bull call diagonal spread should do the trick.
The Trade: Buy the February $145 call while selling the January $155 call for a net debit of $7.05.
You’re risking $7.05 to make $3 if PG stock rises toward $155 by expiration.
Top Stock Trades: Dell Technologies (DELL)
Tech stocks suffered heavily on Friday, but not all components got caught up in the selling. Dell Technologies rallied throughout the day, closing at a new high. The outperformance was epic, and it might as well have been an inverse ETF. It’s a hard chart to beat when you couple the strength with the overall healthy uptrend and rising moving averages.
The climb was continuing on Monday, with prices up another 1.2% at the time of this writing. The breakout completes a two-month ascending triangle pattern and signals the next up-leg beginning.
Consider buying calls to capitalize on more upside.
The Trade: Buy the Aprril $60 calls for $4.30
The risk is $4.30, and the reward is unlimited.
On the date of publication, Tyler Craig 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.
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