Equities snapped their seven-week losing streak with a 6.6% gain in the S&P 500 last week. The much-needed victory has bullish sentiment on the rise and constructive price patterns multiplying. My weekend scanning found ample opportunity, and I’m featuring three of my favorite ideas for top stock trades.
Rather than spotlight a single sector and run the risk that I selected an area that fails to perform, I cast a wide net and found three completely different candidates.
The first is a down-on-its-luck tech giant that has a bullish catalyst coming around the corner. The second is a crypto pick that is leaping to start the week. The third is an entertainment king finally showing signs of life after seeing its share price halved.
Let’s take a closer look at each and map out an intelligent path to profits.
|BITO||Bitcoin Strategy ETF||$19.98|
Top Stock Trades: Amazon (AMZN)
The 20 for one stock split for Amazon (NASDAQ:AMZN) shares is coming in hot. The event is scheduled for June 6, and buyers are swarming in anticipation of it. The attention is desperately needed because AMZN stock was limping some 46% from its highs into month end. With Tuesday’s 3.6% pop, AMZN stock is working on its fourth up day in a row and just completed a textbook double bottom pattern.
For years, small fry retail traders have viewed Amazon as untouchable due to its sky-high share price. Within a week, that will be a problem of the past. At nearly $2,400, the 20-for-1 split will reduce its share price to a reasonable $120.
Today’s breakout makes AMZN a buy all by itself, but the looming split is certainly a cherry on top. I suspect it makes the freshly completed bottoming pattern more likely to stick. Holding options through the event is ill-advised because they’ll quickly become illiquid afterward. So stock with stock trades if you want to play.
ProShares Trust Bitcoin Strategy ETF (BITO)
If you think stocks have fared poorly this year, take a good look at cryptocurrencies. They’ve performed far worse. But for the first time in a long time, Bitcoin is giving buyers a reason to return. In early trading Tuesday, the digital currency saw its share price leap over 11%. More important than the move’s size was the breakout it created.
Bitcoin has been hugging $30,000 in a narrow trading range for the past three weeks. The consolidation came following a massive beatdown that saw prices tumble $15,000 over six trading sessions. Today’s jump is pulling prices through the top side of the range, confirming that buyers now have control.
BITO is the best ETF to use for playing bitcoin in a brokerage account. The high implied volatility makes selling puts an attractive proposition.
The Trade: Sell the July $15 put for 60 cents.
Top Stock Trades: Walt Disney Company (DIS)
Walt Disney Company (NYSE:DIS) qualifies as one of this week’s top stock trades and one of this year’s top long-term investments. You don’t often get the chance to buy a company with as rich a history and as dominant a spot in our culture as Disney at such a steep discount. At nearly 50% off the highs, DIS stock offers a bargain. What traders have been waiting for was a trigger or reason to enter.
I think we just got it.
The recent double bottom and this week’s breakout bid are the first signs that the downtrend has slowed and bulls are finally returning. While you could wait for more evidence, I think this is enough to justify dipping your toes in.
I like purchasing shares for long-term exposure, but if you want to reduce the cost while enhancing the leverage, then here’s an options spread to consider.
The Trade: Buy the September $110/$130 bull call spread for $6.60.
You’re risking $6.60 to make $13.40 if DIS stock returns to $130 by expiration.
On the date of publication, Tyler Craig was long DIS.