Risk appetite has returned, volatility has tanked, and the S&P 500 is back to the top side of all major moving averages. While the next phase of what is hopefully a sustainable uptrend won’t likely be as vigorous, there’s no denying it’s now the bulls’ game to lose. We’re looking at three long ideas for this week’s top stock trades to celebrate their foothold.
Rather than focus on a specific sector or individual industry, I let the charts do the talking. If I found a pretty pattern, it made the cut. And by “pretty,” I mean a classic price pattern with a low-risk, high-reward opportunity. And they’re already rising to confirm and complete their respective setups.
This week’s list takes us from a cryptocurrency to a transportation stock and then ends with a consumer staple. So there should be something for everyone.
These were my favorite stock trades for the new week:
- Proshares Trust Bitcoin Strategy ETF (NYSEARCA:BITO)
- United Parcel Service (NYSE:UPS)
- Dollar General (NYSE:DG)
Top Stock Trades: Bitcoin Strategy ETF (BITO)
Bitcoin has become an excellent vehicle to track and trade. Its price chart behaves very well with technical analysis, mainly due to the lack of other variables to consider in decision-making. Indeed, in the land of crypto, price is king, queen and country. Over the past two months, a bottoming pattern has developed in Bitcoin, taking on the form of an ascending triangle.
The higher pivot lows suggest a subtle increase in demand in the $35,000 to $37.500 range. At the same time, sellers set up camp at $45,000 and rejected every rally attempt, making it the obvious level that needed to be broken before a new uptrend began. We ramped up to the ceiling ahead of the weekend, indicating that a breakout was imminent. Sure enough, prices sailed above it, and Bitcoin is now on a fast track to $50,000.
BITO is Wall Street’s go-to ETF for trading bitcoin if you don’t want to buy the digital currency directly. It tracks bitcoin futures and does a good enough job tracking the spot price of bitcoin to make it a viable proxy.
The Trade: Buy the May $30/$34 bull call spread for $1.30.
You’re risking $1.30 to make $2.70 if BITO rises past $34 by expiration.
United Parcel Service (UPS)
UPS stock gapped higher following the past two earnings announcements, so it currently has a tailwind on the fundamental front. Since the late-January jump, prices have consistently followed charting principles.
For example, the gap-fill area became support and held on three separate tests. Then, a double bottom formed, providing clear levels to trade around. Once we completed the double bottom, prices surged to a higher pivot high amid increasing momentum. The subsequent pullback was textbook, ending with twin reversal candles in the form of a doji and hammer.
Monday morning, UPS stock was jumping nearly 2% to kick-start the next advance. This is an upswing worth playing.
The Trade: Buy the May $220/$240 bull call spread for $6.75.
You’re risking $6.75 to make $13.25 if UPS makes it to $240 by expiration.
Top Stock Trades: Dollar General (DG)
The final of today’s top stock trades takes us to the safety and less volatile shores of the consumer staples sector. Dollar General boasts one of my favorite setups. It’s hot off a well-received earnings report that saw prices leap to a higher pivot high. Volume swelled during the move, adding legitimacy.
And then, instead of making spectators chase, DG stock retreated for four consecutive days. With that, prices returned to the 200-day moving average and created a lower-risk entry point.
This is a second chance for those that missed the earnings-driven rally. The past three trading sessions saw bottoming tails form, which suggests buyers are already moving in.
If you’re willing to wager on a move back to $230, here’s a balanced strategy to use.
The Trade: Buy the May $220/$230 bull call spread for $4.75.
You’re risking $4.75 to make $5.25 if DG rises past $230.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.