The market is setting up for the third 80%-plus downside day in the last four trading sessions. What a painful ride it’s been the last few days. With that in mind, let’s look at a few top stock trades.
Top Stock Trades for Tomorrow No. 1: Tesla (TSLA)
Click to Enlarge
The market-wide selling pressure and concerns over Elon Musk’s deal for Twitter (NYSE:TWTR) are finally weighing on Tesla (NASDAQ:TSLA). In turn, the stock fell more than 12% on the day.
Is it time to panic?
To be fair, we do have a rather orderly “ABC” correction to a key zone. The dip took Tesla down to the 200-day moving average, as well as the 161.8% downside extension of the “B” leg, and the 61.8% retracement of the larger range, as measured from this month’s high to last month’s low.
I know, I know, that sounds like a bunch of jargon. But the point is, there could be some order to the decline. Another way of looking at it is, Tesla stock is not retesting its 2022 lows while the market is doing so — and as many EV stocks are well below them.
That said, a move below $870 and the story becomes notably more bearish. In that scenario, $800 could be on deck, followed by $785, then the 21-month moving average.
On the upside, we need to see a move back over $900 and the 200-day. If we can get that, $940 to $950 could be next.
Top Stock Trades for Tomorrow No. 2: Microsoft (MSFT)
Click to Enlarge
Microsoft (NASDAQ:MSFT) can either stem some of the market’s bleeding or make it a lot worse when it reports earnings tonight, alongside Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG).
Like Tesla, we have an “ABC” look here on Microsoft as well. The question is, how far down does the “C” leg go?
On a rally, I want to see if Microsoft can push through active resistance, which is the 10-week moving average. Above that puts $300 in play, where the stock finds its 50-week and 21-week moving averages.
Microsoft is near its 21-month moving average, as well as the 2022 lows. I’d love to see this area hold as support, even if the stock initially breaks below it.
If we get a real break lower — like sub-$250 — then keep an eye on the $242 area. There we find a key downside extension level and the monthly VWAP measure.
Top Stock Trades for Tomorrow No. 3: Lucid Motors (LCID)
Click to Enlarge
As I mentioned earlier, other EV stocks — like Lucid Motors (NASDAQ:LCID) — are getting killed right now.
If we get a big pop, keep your eyes on $20 and the declining 10-day moving average. Those will be the measures we need to see LCID push through to unlock more upside.
On the downside, the $16.12 low from September 2021 is glaring at me; it’s taunting the stock, which is acting like a month to the flame. If it gets there, let’s see how it trades. A break, then reclaim of this area might give it the potential for a reversal.
Top Trades for Tomorrow No. 4: General Electric (GE)
Click to Enlarge
General Electric (NYSE:GE) couldn’t deliver the goods this morning when it reported earnings. As such, it’s trading at one-year lows.
The stock is knifing through its 200-week moving average, but finding support at the 50% retracement. If it can continue to bounce from here, see how it handles the 200-week, then the $88 level — which is now failed support.
If today’s low gives out, bulls must keep an eye on two downside levels: $71.40 and $65.12.
The first is the 61.8% retracement from the 2021 high down to the 2020 Covid lows. The second is the gap-fill level from November 2020.
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.
