After a robust rebound on Monday, stocks continued to push higher on Tuesday. With that in mind, here’s a look at a few top stock trades as we approach mid-week.
Top Stock Trades for Tomorrow No. 1: General Motors (GM)
I was sizing up General Motors (NYSE:GM) this morning, looking for a potentially flat open or a quick daily-up rotation.
Instead, the stock almost retested Monday’s low, which would have actually been a great setup had it broken the low and reclaimed it.
In any regard, we now have an inside day with a hammer candle. An inside-and-up rotation over Tuesday’s high could draw in bullish traders once again, putting this week’s high in play, then possibly the $64 to $65 area.
Either that or an undercut of the two-day low could get bulls in on a reversal. Just below this week’s low is last week’s low as well as the 50-day moving average.
Keep in mind, this stock was north of $67 just a few days ago.
Top Stock Trades for Tomorrow No. 2: Digital World Acquisition Corp. (DWAC)
I’m not a big fan of trading Digital World Acquisition Corp (NASDAQ:DWAC) because of its outsized moves and wide ranges. Plus it has a lot of headline risk (in both directions). That said, I know some traders that have done quite well with this name. So if you can handle the volatility, perhaps it’s worth a shot.
Shares are testing up into the $63.50 level, which has been resistance lately, as well as the December high at $66.31.
DWAC stock is fading from those levels now, which is not too surprising. However, if it can clear these marks, it could open the door to more upside — and possibly do so in a hurry. In that case, I would have $75 on my radar, then $89.50, then $100 to $105.
On the downside, though, a break of $50 — and thus the 10-day, 21-day and 50-day moving averages — would be problematic for the bulls.
Top Stock Trades for Tomorrow No. 3: Ark Innovation Fund (ARKK)
Hey, we went a full few days without talking about the Ark Innovation Fund (NYSEARCA:ARKK)! However, the stock is now undergoing a pretty potent reversal.
These are some of my favorite trades. Why? Because the setup has a defined entry and defined stop-loss.
In the case of ARKK, we had a reclaim of last week’s low at $82.65 with a strong finish. Now we have continuation higher. From here, I want to see how ARKK handles the key $90 level and the 10-day moving average. Above that puts the 21-day moving average on the table, followed by the $97 level.
On the downside, however, a break back below the $82.65 level is a huge caution sign and puts the low near $80 on the table.
Top Trades for Tomorrow No. 4: Union Pacific (UNP)
This isn’t a typical stock for a trading column, but that’s what we’ve got with Union Pacific (NYSE:UNP). The stock has been chugging higher until recently as it has suffered from two large daily dips.
Aggressive bulls could have bought the reclaim of last week’s low, but that doesn’t really feel like an A+ setup to me.
Instead, I’m going to keep an eye on this week’s low near $245. If the stock breaks that low in the next couple of days, it has the 50-day moving average and uptrend support just below it (blue line).
So a break of this mark and a bounce from support back up through that level — $245 — could put longs back in control with a defined level of risk. I like that.
On the upside, it needs to get back up through $248.50 and preferably, back up through $250. If it can do that, then $255-plus is on the table.
Conversely, a break and close below $243 could put $238 in play — the low from Dec. 20.
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.