Stocks opened mixed on Monday, and the muddled message hasn’t improved throughout the morning. The 20-day moving average has proven formidable resistance for all major indexes, and it’s telling bulls to temper their enthusiasm. At the same time, a higher pivot low is trying to form in both the S&P 500 and Russell 2000, suggesting that bears aren’t exactly winning the day either. The absence of direction means we’re taking our cues from individual charts for this week’s top stock trades.
Oil and late-cycle money flow continue to prop up energy companies, so I found one offering a rousing breakout pattern. Elsewhere, earnings reports continue to trickle in, and it has some stocks showing strength. My second and third picks have clean buy-the-dip setups after smashing analyst estimates.
That’s the pitch; here are the picks.
After the usual chart breakdown, I’ll map out an options trade you can use to profit.
Top Stock Trades for the Week: Valero (VLO)
Oil prices continue to defy gravity, and the ascent is providing a massive tailwind for energy stocks like Valero.
Crude tagged $93 on Friday after notching its seventh straight up week in a row. VLO stock has returned to significant resistance in the $85 area. It’s the spot where multiple rallies went to die in 2021. But this time, prices are muscling through the graveyard. Shares are up nearly 3% in early-morning trading, fast approaching $90.
The weekly chart shows clear air until the next ceiling at $100. That leaves plenty of available profits if you think the good times continue to roll for energy plays. Long calls or call spreads are my plays of choice to better leverage the potential upside.
The Trade: Buy the June $90/$100 call vertical for $3.60.
You’re risking $3.60 to make $6.40 if VLO stock climbs past $100 by expiration.
Alphabet (GOOG, GOOGL)
Alphabet shares soared 65% last year, besting the S&P 500’s gain by a massive margin. This quarter’s earnings report revealed why investors love the stock so. The search giant smashed revenue and earnings per share estimates, growing sales by 32%.
If that weren’t enough, the notoriously expensive stock revealed a surprise 20-for-1 stock split scheduled for July. The sharp reduction in its share price will open the doors to a new class of investors who previously balked at the rich price tag. Additionally, it brings Alphabet into a price range that makes it feasible for admission into price-weighted indexes like the Dow Jones Industrial Average.
GOOGL stock gapped to a new all-time high on the news but has since declined for four straight sessions and is close to filling its earnings gap. Those who missed the jump are getting a second chance to acquire shares at pre-earnings prices. There’s a good chance that support begins to form in this area, so I’m watching for evidence of an upside reversal over the subsequent few trading sessions.
If you want a higher probability of profit, consider deploying bull put spreads.
The Trade: Sell the GOOGL March $2,500/$2,490 bull put spread for $1.15.
Consider this a bet that the stock sits above $2,500 in a month. You’ll capture the $1.15 credit received at trade entry if it does.
Top Stock Trades for the Week: United Parcel Service (UPS)
United Parcel Services rounds out this week’s top stock trades. Quarterly reports have been the biggest driver of UPS stock over the past year. There have been some monster moves up and down, creating a messy overall chart.
Fortunately, last week’s announcement delivered an epic jump to record territory. Volume exploded as buyers rushed in. It’s the type of participation that suggests we could see continuation. For that reason, I think the current pullback is a buying opportunity.
Bull call or bull put spreads are my two strategies of choice here. Let’s take the more directional route with a bull call.
The Trade: Buy the March $230/$240 bull call spread for $2.90.
You’re risking $2.90 to make $7.10 if prices climb beyond $240 by expiration.
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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