We’re in a different kind of market, now. The bounces are short lived and swing traders are getting chopped up in both directions. Growth investors are taking big losses and shorts are finally keeping the pressure on. It sets up an interesting list of top stock trades as the S&P 500 sits in a precarious range.
Top Stock Trades for Tomorrow #1: S&P 500 ETF
Those looking for an easy holiday week of trading didn’t get off to a good start on Monday. The SPDR S&P 500 ETF (NYSEARCA:SPY) fell about 2% at its lows, although is staging a potentially solid afternoon reversal.
Tech was the main culprit, after Nvidia (NASDAQ:NVDA) fell 10% and Apple (NASDAQ:AAPL) dropped 4%. (Here’s our strategy from last week on Nvidia.)
For the SPY, it’s nice to see the ETF bouncing from its lows. Particularly as its lows just barely took out those from last week and then snapped higher. Below this mark and October’s lows are on the table. Above and we’ll have to see how the ETF handles the 200-day.
One thing is clear though: Until we get some better news on China and/or the Fed’s rate hikes, markets could have trouble rallying.
Top Stock Trades for Tomorrow #2: Alphabet
Shares of Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) have been caught up in a very orderly round of selling. It makes it feel like the losses aren’t that bad, when in reality the stock is teetering on bear market territory, down about 20% from its highs.
In particular, the last month of trading has been very orderly, with GOOGL staying in a well-defined channel. If we get a chance to buy Alphabet near $1,010, investors have a very solid risk/reward on their hands.
Not only is business going well for Alphabet — unlike some other FANG names — but this area has been proven support for the last year. Aggressive traders may consider a long near $1,020, while others may wait for a potential break of $1,000.
Top Stock Trades for Tomorrow #3: Salesforce
Another ugly name in tech has been Salesforce (NYSE:CRM). Shares knifed through the recent lows near $127.50 as CRM is showing quite bearish price action on Monday.
While it’s still in a downward channel, this one is tough. Short-term traders may consider buying on a gap down into the $117.50 area and looking for a bounce into the low- to mid-$120s.
But other than that, use caution with this one, as high-growth tech is highly out of favor right now. Back over the 21-day and 200-day moving average looks constructive for investors.
Boeing (NYSE:BA) is similar to Alphabet, although concerns over a recent flight crash are acting as a roadblock to the stock.
That said, this $325 area has been support and now below it, shares are coming up to a very significant level between $308 and $315. Investors who want to go long have a solid risk/reward entry near this area. Once below it, they can stop out. Over it and we can get a rebound back to $330.
Top Stock Trades for Tomorrow #5: Square
Down almost 10% on the day, Square (NYSE:SQ) remains in the hurt locker. It’s dropping right through short-term level support near $65 and even the 200-day is failing to give it a lift.
If we get a rebound on Tuesday or Wednesday, I’d expect a strong snap-back for SQ stock. This action feels like algos trying to drive SQ below investors’ panic point and stop-loss levels. Think how many people had a stop-loss parked at or just below the 200-day. My gut feeling is that these stops are being run.
If we were in a more favorable buy-the-dips environment, I’d nibble some SQ with the anticipation of a bounce. But in this environment, I’m either sitting on my hands or being very, very selective about what’s out there. Square’s too risky for me right now.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long GOOGL and CRM.
