After a holiday-extended weekend, traders returned to a market as messy as the one they left. Stock futures registered an extremely volatile session on Monday amid continued angst surrounding Russia. Even if it resolves itself peacefully, we still have to grapple with sticky inflation and the bid it’s creating beneath interest rates. With that backdrop, we’re offering something for both bulls and bears in this week’s top stock trades.
The buy side starts with a commodity-based stock benefiting from rising price pressures. Next up is a beaten-down growth stock attempting to bottom after better-than-expected earnings. Both charts look good but will have better odds if the broad market can stop sinking.
Finally, the sole bear idea is a down on its luck growth company with a share price that is cracking support.
That said, here are this week’s three picks.
Let’s dive deeper into each chart and map out how to profit.
Top Stock Trades of the Week: Nucor (NUE)
We’re seeing parallels between the last inflationary scare in late 2007 and 2008 and the current one. Back then, energy and basic materials were the top two performing sectors. And it’s playing out similarly today. Steel stocks are pushing higher, and Nucor boasts one of the most promising patterns. It’s spent the last six months in a trading range.
Last month’s earnings report boosted NUE stock from the lower to upper end of its box, and it’s now trying to break out. A successful breach should bring fresh buyers running. Not to mention the fact that any shorts should be running for cover.
To fully capitalize on what could be explosive upside, consider buying call spreads. Of course, you could wait for the stock to climb above $126 to confirm the breakout before pulling the trigger.
The Trade: Buy the April $130/$140 bull call spread for around $2.75.
The max loss is $2.75, and the max gain is $7.25.
If you’re itching for a growth stock showing signs of life after a year of destruction, then take a good look at Zillow.
At its low last month, the real estate company had fallen 78% from its peak. There have been countless failed rallies along the way, but the current one looks promising. Here’s why.
Earnings delivered a sharp gap higher, pulling prices above the falling 20-day and 50-day moving averages. We also formed a higher pivot high in the process, which turned the daily trend higher.
However, we need prices to stay above the 50-day moving average for the uptrend to stick. Buyers must support the nascent strength by buying the current pullback. Thus, today’s trade idea is contingent on Zillow shares forming a pivot low before breaking $56.
If it does, then I like purchasing call spreads.
The Trade: Buy the April $60/$70 bull call for around $3.
You’re risking $3 to make $7 if Z stock rallies to $70 by expiration.
The final idea for this week’s stock trades is Netflix. Investors destroyed the streaming giant after disappointing earnings. A robust dead-cat bounce ensued and is in the process of unraveling. Over the past week, support has formed near $385, and prices were breaching it Tuesday morning. That makes a revisit of the $351.46 low a real possibility.
The rich price tag of NFLX stock and options makes spread trades the intelligent way to go. Of course, you can shrink or widen the spread width depending on your desired cost, but here’s a good structure to start with.
The Trade: Buy the April $370/$350 put spread for $7.
You’re risking $7 to make $13 if NFLX sinks to $350 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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