- Salesforce (CRM) is falling into pivotal support.
- Carvana’s (CVNA) strong growth may be setting a double bottom.
- Disney (DIS) is an old dog that has learned new tricks.
Today I’m going to look at three stocks to buy that don’t necessarily have common fundamental threads. However, all of these stocks to buy have thriving businesses and struggling stock prices.
There are two main reasons it could pay to catch these falling knives. First, the businesses are showing no permanent fractures. So whatever is ailing the stock now is only temporary. Second, each of these stocks has near-by support. (That’s actually the main thing each of these companies have in common).
When a stock falls into an area that has been pivotal before, it tends to find support waiting there. The closer the last battle over it makes it all the better. The idea is that investors are comfortable repeating the same trades that paid them before. This is where the Wall Street saying that “price is truth” applies. If traders were busy fighting over the upcoming levels below, they will likely fight over them again.
However, the three stocks to buy today are not foolproof so investors need to stay vigilant. Because they are falling into contentious levels, they can quickly sour if they fail to bounce. In other words, what is support now can rapidly turn into a bearish accelerant. The debacle that follows that can vary in size depending on the patterns they draw.
As such, we should consider all three of these stocks to buy as tactical trades not investments.
| Ticker | Company | Current Price |
| CRM | Salesforce$ | $195.72 |
| CVNA | Carvana | $105.09 |
| DIS | Disney | $132.35 |
Salesforce (CRM)
I will start with Salesforce (NYSE:CRM) stock because it’s a rinse and repeat trade. When the stock fell into about the same region, buyers who bought the dip won. The payout was about 15% from low to high and twice over. This opportunity is the exact replica of those scenarios, and the assumption is that support will hold one more time.
The fundamentals for CRM have not changed, and this company is still on the rails. Its leadership is beyond reproach, because it has proven itself many times over. It battled giants like Microsoft (NASDAQ:MSFT) and beat them at their own game. In the process, Salesforce worked to create what we now call the cloud.
This has since become the norm that almost all companies implement. Salesforce dared to innovate back in 1999. It has taken a long time, but now the rest want to be on board. Nevertheless, Salesforce is not foolproof because its stock is showing weaknesses. So when I say that there is support, it is not certain. The bears have attempted to pierce it a few times. Eventually, one of these bounces could breakthrough.
There is no evidence that this is one to fail, but you never know. Therefore, taking this strategic bullish position is purely tactical. I expect that CRM stock can bounce 11% from here, unless the overall market foils it. The fundamental discussion on that is pretty simple. The business is very successful, and has a long runway ahead of it. I expect this to continue for at least a few more years.
Carvana (CVNA)
When I first heard of a company establishing car vending machines I didn’t take it seriously. Now I drive by one when I visit family up the freeway. Believe it or not, Carvana (NYSE:CVNA) made it happen. Signs point to a successful business with a bright future ahead. Proof of progress lies in the explosive revenue growth line in CVNA’s profit and loss statement. What isn’t so clear is why the company’s sales and stock price lines are so divergent.
Judging by the CVNA price action one would think that the company is collapsing. Peering into its growth metrics you’d easily discount that notion. My only fundamental concern is the level of spend. I’m not so much concerned with the $135 million net loss last year. What could be a problem in a rising rate environment is its large negative cash flow from operations.
This suggests that it may need to borrow a lot to maintain the spending to feed the growth. If I’m right, then Carvana may struggle to match the growth it has delivered so far. Despite this potential long-term issue, there is a swing opportunity in CVNA stock.
The stock lost more than 70% of its value since reaching its highs. It is now trying to hold the early March bottom. If it fails, it would trigger another leg lower, but there is hope it won’t. It has finally fallen into old support, matching the pre-pandemic top. This should be a pivotal zone important enough to force a big fight. In addition, the century mark plays a significant psychological role with traders.
If CVNA holds this double bottom potential it can finally exit from this descending channel. Traders who attempt to buy this dip must be diligent with their stop loss levels. Until we have evidence of this double bottom, this remains a tactical trade not an investment. Using options might help limit the amount of risk for this one.
Disney (DIS)
Disney (NYSE:DIS) stock has had a very choppy few months, which makes it be a stock to buy on dips. It is finally starting to stabilize a bit, and in the process, it established a wide range. After a series of lower-highs, it is finally establishing a floor. This year, DIS stock has not made lower-lows and that’s step one of setting bottoms. I expect for it to hold if the indices don’t correct.
The fundamentals are still strong, although it is not the same company as it was a few years ago. The introduction of its streaming service was timely and it helped save the company during the pandemic rough patch. Until now, DIS had been a crowd company depending on gatherings in theaters or at its theme parks. So, when the world locked itself down, the streaming platform was a great alternative.
I expect the momentum on that front to continue for a long time. Also management is savvy enough to take that and incorporate it into its long-term objcetives. But shorter term, my goal with Disney stock is to see it rise 10%. If support holds, it will inevitably reach that point in the next few weeks.
Long-term investors can even start with this, and then morph it into whatever else they want. I don’t see the need to tie up capital with so much uncertainty everywhere, especially when markets are this close still to all-time highs.
On the date of publication, Nicolas Chahine 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.
