After four powerful rallies, stocks took a needed break on Monday. With that in mind, let’s look at where the market may find its footing and eye some top stock trades in the meantime.
Top Stock Trades for Tomorrow No. 1: Nasdaq ETF (QQQ)
Looking at the Nasdaq via the Invesco QQQ ETF (NASDAQ:QQQ), notice the four-day surge into a very notable area on the chart.
In a video from Sunday night, I noted that the QQQ and the Nasdaq are rallying into four key areas of potential resistance. They include the 61.8% retracement (from the March low to the February high), the fourth-quarter low, the March high and the declining 50-day moving average.
Whew! That’s a lot of levels. Not surprisingly, the QQQ and the Nasdaq are pulling back on Monday. Where it finds its footing is now the key. I would love to see the QQQ hold up over the 10-day and 21-day moving averages — the latter of which has been active resistance.
Below that and we’ll start talking about the $330 to $335 area again.
On the upside, though, a move above Monday’s high — and even better, a close above it — opens the door to the $363 area. Above that puts the February high and the 200-day in play.
Top Stock Trades for Tomorrow No. 2: Shopify (SHOP)
Shopify (NYSE:SHOP) roared higher on Friday, rallying more than 18%, then face-planted hard on Monday. At one point, shares were down more than 16% during the session. It’s really unfortunate for the longs because this is a fantastic company.
With Monday’s action, we have an inside day forming as Shopify stock holds above the 10-day and 21-day moving averages — again, those are prior active resistance levels — as well as the daily VWAP measure.
An inside-and-up rotation over Monday’s high could put last week’s high near $780 in play. That’s followed by the declining 50-day. Eventually, there’s a potential gap fill in play near $843.
On the downside, however, an inside-and-down rotation opens the door to all those key measures we just mentioned. If those fail as support, then $614 or lower is in play. A close below $600 puts this month’s low in play.
Top Stock Trades for Tomorrow No. 3: Nvidia (NVDA)
That allowed traders to move to a break-even stop-loss on the remainder of their position while targeting a further push. While it wavered on Monday, the next area I’m watching is $275 to $277. That’s the 50% retracement of the entire range. Beyond that opens the door to the $290s — the 61.8% retracement.
As for today, the stock is running into the February high and VWAP measure off the November high.
If we get a real unraveling in the stock, watch the 10-day and 50-day moving averages. Bulls need these levels to be support.
Top Trades for Tomorrow No. 4: Nike (NKE)
Earnings are due up for Nike (NYSE:NKE) after the close, and the stock has not been trading well. Although it’s a high-quality company, the market has been selling without discretion lately.
Many of the high-quality retailers have rallied after reporting this quarter, but Nike is a blend between a retailer and apparel maker.
Now trapped between the 10-day and 21-day moving averages after a strong rally, what levels matter on the move?
On a bullish post-earnings rally, I’m watching the declining 10-week moving average, followed by the $139.50 level and the declining 50-day. Above that puts the prior support zone in play near $145.
On the downside, though, there’s an open gap near $120.40. Below that puts this month’s low in play at $116.75, followed by the 200-week moving average. If it were to test down into the latter, it would mark a decline of 14% from current levels.
On the date of publication, Bret Kenwell held a long position in NVDA and a short position in the QQQ in the form of a hedge. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.