- Equities are on the ropes, making bear ideas the most compelling for this week’s top stock trades.
- Goldman Sachs (GS): Financial stocks are flailing, and this investment bank just cracked critical support.
- Salesforce.com (CRM): High beta growth companies remain out of favor, and this SAAS stock is rolling over again.
- Silver Trust ETF (SLV): The oversold posture of silver after Monday’s meltdown is beckoning to contrarians.
The stock market is turning into a dumpster fire. And it’s not making life easy for bulls or bears. High volatility reigns, and big swings in both directions challenge the conviction of both longs and shorts. Rookie traders should seriously consider parking themselves on the sidelines until the storm blows out. I found three top stock trades for the week for all you other degenerates.
Given the topsy-turvy backdrop, I’m throwing out two bear ideas and one bull. That way, there’s something for everyone! In truth, bear trades would have made a clean sweep, but I found the potential support bounce in silver too tempting to pass up. Let’s take a closer look at each and map out a path to profits.
|SLV||Silver Trust ETF||20.82|
Top Stock Trades: Goldman Sachs (GS)
Last week, the financial sector breached a significant support zone, and it completed a nasty topping pattern. With the weekly and daily trends now pointing down, I’m finding many bear ideas for banks. Goldman Sachs (NYSE:GS) is 28% off its high and has been trending lower all year long. The descent has been severe enough to turn the 200-day moving average lower, so sellers officially dominate across all time frames.
Friday’s swoon pulled prices below another horizontal support zone, and there’s plenty of room to run if sellers press the advantage. I don’t doubt there will be bounces along the way, but if you think the trend continues, then put spreads offer a great risk/reward.
The Trade: Buy the June $310/$290 put spread for $7.40.
The max loss is $7.40, and the max gain is $12.60.
Growth stocks are universally hated right now. And while it will one day pay to be a contrarian and finally buy the blood, timing the entry has been futile. Salesforce.com (NYSE:CRM) has fallen nearly 50% over the past six months and now finds itself submerged beneath all major moving averages.
Its last downswing saw a surge in momentum, which suggests bears’ strength is growing. With that, rallies remain suspect. Friday’s rollover formed a lower pivot high, and $160 beckons as the next stop.
The high volatility is making long puts a costly proposition. To reduce the capital required, use put spreads instead.
The Trade: Buy the June $170/$160 put spread for $3.25.
You’re risking $3.25 to make $6.75 if prices fall to $160.
Top Stock Trades: iShares Silver Trust (SLV)
Over the past two weeks, the rug pull in precious metals has been painful to watch. Silver just gave back the entire year’s gains and is such a disappointment. Investors were hoping the inflation surge would provide a sustainable tailwind, but with the recent whack, the iShares Silver Trust (NYSEARCA:SLV) is flirting with an 18-month low.
Emboldened bears might be betting on a support break, but we have a lengthy history of bounces near the $20 to $21 zone. Couple that with the oversold conditions, and I think a snapback could be in store. At a minimum, we could tread water for a bit which bodes well for selling puts.
The Trade: Sell the June $20 naked put for 53 cents.
You’re obligating yourself to buy shares if the put expires in the money. You’ll pocket the max gain of 53 cents if it doesn’t.
On the date of publication, Tyler Craig 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.