For this week’s top stock trades, we’re focusing on strength. And I’m not taking the easy route by jumping on the commodity train either. Instead, I’m offering up two healthcare companies and one blue-chip industrial stock.
I could have given healthcare a clean sweep with three picks, but the industrial name was too good to pass up. Plus, this isn’t a market for concentrated bets. Playing multiple stocks in different sectors offers at least some safety.
This week’s selections are all creating bullish breakout patterns. They’re at the top right of their charts and could catch fire once resistance gives way. Remember, the broad market has been sinking like a stone. So the fact that these tickers have been pushing to new highs is impressive and an obvious sign of outperformance.
That’s the pitch. Here are the picks:
As always, I’ll share my preferred way to play using stock options. That will allow us to build a cheap bet with significant payout potential if the strength continues.
Top Stock Trades for the Week: Bristol-Myers Squibb (BMY)
Bristol-Myers Squibb shares are behaving like an inverse exchange-traded fund. They’ve gone straight up this year in defiance of the bear market ravaging stocks. Over the past month, a high base has formed just under $70, creating a clear breakout. The appeal improves when you look at the long-term chart. For seven years, we’ve seen half a dozen rallies die at the doorstep of this round number. And that means prices have zig-zagged in a broad trading range.
I learned in charting kindergarten that you want to be a buyer when prices break out of long-term bases. It signals a powerful sentiment shift and carries high odds of follow-through. BMY stock has room to run to $77, making it the first logical target. To capitalize, I like buying call spreads.
The Trade: Buy the May $70/$75 bull call spread for $1.55.
You’re risking $1.55 to make $3.45 if BMY climbs to $75 by expiration.
Abbvie shares have gained ground nearly every week this year. It’s an impressive feat and speaks to just how consistent demand has been. Recently, prices have been coiling in a tight range to create a high base pattern.
The 20-day, 50-day, and 200-day moving averages are all rising. Notably, the 20-day moving average has caught up and is putting upward pressure on prices.
Monday saw volume swell as prices finally breached resistance at $151. The participation uptick lends credibility to the rally, making it more likely it sticks, and we see upside follow-through. Consider $160 as the next target. Call vertical spreads offer compelling profit potential.
The Trade: Buy the May $155/$160 bull call spread for $1.90.
The max loss is $1.90, and the max gain is $3.10.
Top Stock Trades for the Week: Deere & Co (DE)
Deere & Co isn’t the most popular industrial stock, but it has enough liquidity to make it a viable vehicle for active traders. Surprisingly, it’s been a bastion of strength this year. So far, shares are up 15%.
It’s been a volatile ride, but prices are now testing the upper end of their one-year trading range. Resistance at $400 is the zone that bears watching. Before deploying bullish trades, we need to break out, making this a simple idea to conclude this week’s top stock trades.
The rich price tag of DE stock is filtering into its option premiums. It moves approximately $16 a day on average, so the option values deserve to trade at higher premiums. To lower the cost and avoid throwing thousands into a single trade, we’re again going with a vertical spread. In timing the entry, either wait for prices to trade above $400 intraday or close above it.
The Trade: Buy the May $400/$420 bull call spread for around $8.
You’re risking $8 to make $12.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.