U.S. equities enjoyed solid gains on Wednesday, but lacked the upside breadth necessary to say, “the coast is clear!” After moving lower in premarket trading and in the regular session after the CPI report on Thursday, bulls are wondering if we’ll retest the February low. Let’s look at the S&P 500 as the first of our top stock trades.
Top Stock Trades for Tomorrow No. 1: S&P 500
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The question is no longer, “will this be at least an “ABCDE” correction?” Instead, the question is now, “how low will the last leg — the “E leg — take us?”
When we look at the daily chart of the SPDR S&P 500 ETF (NYSEARCA:SPY), the market is trying to find its footing.
The SPY fell hard in four straight sessions from a major resistance zone. In that area, we had the 61.8% retracement near $440 and the daily VWAP measure. It bounced before retesting last month’s low but was rejected by last quarter’s low near $426 and the 10-day moving average.
Now perched on the 61.8% retracement of “D leg” near $422.25, today’s range is important.
A break of today’s low ($420.45) opens the door down to the March low. Below that and the 2022/February low is in play at $410.64. Below that could open the door down to the 21-month moving average and the gap-fill level near $400.50. A further break could put the $392 to $393 area on the table.
On the upside, a move above $429.51 — yesterday’s high — and we could see a push up to the 21-day and 10-month moving averages.
Top Stock Trades for Tomorrow No. 2: Alibaba
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What a disaster this stock has been, as Alibaba (NYSE:BABA) is now down 71% from its all-time high made in late 2020.
While it’s not odd to see losses of this magnitude due to the meltdown in growth stocks, Alibaba’s decline started long before that group’s decline. Plus, Alibaba is/was a huge company. At its high, its market capitalization had swelled beyond $840 billion. Now it sits at just under $250 billion.
In January, Alibaba cleared the December high near $129.50, but later in the month it broke back below this level and it turned into resistance. That was an opportunity for bulls to bail. If they didn’t get out then, the loss of $110 support was another opportunity.
Now below $100 and Alibaba stock is firmly in no man’s land.
I hope we don’t see it come to fruition, but significant support sits down around $60. On the upside, Alibaba needs to reclaim the 10-day, then $100. That will put former support near $100 on the table.
Top Stock Trades for Tomorrow No. 3: JD.com
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JD.com (NASDAQ:JD) has been collapsing lately, with shares now down 28% in less than two weeks.
The saving grace here may be the 50-month and 200-week moving averages, as well as the key $50 level. Aggressive bulls — and I mean aggressive — can consider a long position against these two marks.
A rotation above today’s high ($55.35) could fuel a run back into the low-$60s and the 10-day moving average.
However, there’s no shame in taking a pass on this one.
Top Trades for Tomorrow No. 4: Rivian
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Last but not least, we have Rivian (NASDAQ:RIVN). I have nothing against Rivian from a business or product perspective, but my biggest issue with the company has always been its valuation.
With companies like this — and particularly in a bear market — it’s so hard to figure out what the “right price” is.
Rivian is enduring a nasty streak. Shares are down in seven of the last eight sessions and are on the verge of breaking to new lows below $40. If that happens, traders might target the $36.50-ish area, which is the 161.8% downside extension mark.
On the upside, bulls want to see Rivian recapture $50 and the 10-day moving average.
On the date of publication, Bret Kenwell 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.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
