After a pretty powerful rally off the lows, stocks are taking a breather on Thursday ahead of the non-farm payrolls report on Friday. With that in mind, let’s look at a few top stock trades as we wrap up the first trading week of February.
Top Stock Trades for Tomorrow No. 1: S&P 500 ETF (SPY)
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I wish I had posted this yesterday instead of today because I have been watching the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) pretty close lately. We were able to nail the move the $457, take our foot off the gas and are now looking for support.
As expected, the $449 to $450 area is acting as support for the moment. There we find the eight-day and 10-day moving averages, the 50% retracement and the December low.
If this remains as support, I would consider it pretty healthy action and believe the bulls can regain control.
If we see a further decline, though, the $444 level and the 200-day are back in play. Should the SPY lose $440, then man, all bets are off and traders will have to remain nimble in an expanded-volatility environment.
Top Stock Trades for Tomorrow No. 2: Ford (F)
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Ford (NYSE:F) gave bulls a beautiful breakout as it went surging up to $25, then quickly slammed on the brakes and went in reverse. Shares plunged back into the prior trading range of $19 to $20.50, while traders acted like the 50-day moving average wasn’t even there on the pullback!
Since bottoming near $19, Ford stock has been rejected by the 50-day moving average twice. That doesn’t bode well, although earnings after the close may help shape a different story.
On the upside, keep an eye on the 10-day and 50-day moving averages. Back above those marks means Ford stock is back above $20.50 resistance, too, and puts the $22 area in play.
That was a major breakdown zone and it’s currently where the declining 21-day moving average and the 50% retracement are at.
On the downside, however, bulls must be careful with a bearish earnings reaction. The $19 level is the first zone to watch. Below that and we could have an “ABC” correction on our hands, potentially putting $17.50 and the rising 10-month moving average in play.
Below that gets us the $16.50 breakout area and the 200-day moving average.
Top Stock Trades for Tomorrow No. 3: Snap (SNAP)
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Snap (NYSE:SNAP) is being punished for Meta’s (NASDAQ:FB) mistakes. The question is, did Snap make the same or similar mistakes too? We’ll find out when it reports tonight. Same with the next stock on this list, Pinterest (NYSE:PINS).
Snap stock is knifing right through the 200-week and 50-month moving averages after a nice bounce last week.
After earnings, I want to see these levels reclaimed, followed by $30. Above this week’s high could put $38 and the declining 10-week moving average in play.
On a move lower, though, that $20 to $21 area from the third quarter of 2020 really stands out.
Top Trades for Tomorrow No. 4: Pinterest (PINS)
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While we have been trading the SPY well, our investment in Pinterest has been a mess. The stock is now down massively from its highs and as a long-term holder from both higher and lower prices than Thursday’s action, I can say I’m quite disappointed.
Bulls would be lucky if the company would just sell itself at this point, even if the fundamentals point to a fairly rosy picture over the next three to five years (assuming consensus estimates are even remotely accurate). This management team has done poorly, in my opinion. Thus, the lack of trust in them to turn things around on their own.
To be clear, I’m not blaming them for the poor price performance — they don’t control the stock market. However, I blame them for their lack of transparency. Maybe I’m dead wrong, but that’s just my gut-feeling takeaway.
As for the stock, $27-ish has been a line in the sand. On a pop, see that PINS stock holds this level, otherwise this week’s low remains vulnerable. Above $27 and $30, and potentially higher is in play.
It’s almost impossible to imagine that all the negativity isn’t priced in at this point, but the market hasn’t seemed to find an issue selling stocks lower.
On the date of publication, Bret Kenwell held a long position in PINS. 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.
