Thursday was a wild day on Wall Street, with some stocks flying and others dying. And with so much variation between sector performance, it’s increasingly becoming a market of haves and have-nots. So, whether you’re happy with your portfolio this week very much depends on where you have exposure. Therefore, let’s take a look at three of my favorite top stock trades.
The hottest sector by a long shot remains technology. However, many leaders are skirting the stratosphere and thus, offer poor entries. I’m talking Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and the like. What’s more attractive than chasing the big boys, though, is finding stocks to buy that are just now emerging from well-established bases. The risk is lower, and they arguably have more gas in the tank than the tech giants that have already run for so many consecutive sessions.
In addition to their more tempting entries, all of these selections went absolutely bananas on Thursday. That said, I love the relative strength and think it suggests more gains to come in the following names:
As usual, we’ll take a closer look at their charts and offer the technical reasons why they’re such compelling plays. So, let’s dive in.
Monster Rally Stocks to Buy: Advanced Micro Devices (AMD)
You might think our first pick is obvious because it hales from the tech sector. But before Thursday, Advanced Micro Devices hadn’t participated in the tech boom virtually at all. Not since mid-April, at least. Bears might spin its relative weakness as a negative, but I think all it’s done is made the eventual breakout all the more compelling.
I see a beautiful cup-and-handle pattern on the weekly time frame that is now on the cusp of completion. AMD is on every momentum traders’ radar, and I guarantee they’re all perking up after this week’s ramp back up to resistance.
If you want more confirmation, you can wait for a push above $58 to signal the resistance breach is here. Given the volume behind Thursday’s rally, however, I think an upside break is inevitable.
The Trade: Buy the Aug. $57.50/$62.50 bull call for around $1.75.
Costco Wholesale (COST)
The hubbub surrounding Costco’s unique positioning to profit from the novel coronavirus has died down considerably in recent months. And in that time, its stock price hasn’t budged. Like AMD, the silver lining of an asset treading water for months is it creates a clear trading range to build bets around.
One of my favorite technical analysis phrases is “the bigger the base, the higher in space.” COST stock has been hugging $305 since last September, effectively creating a year-long base that we’re now breaking out of. Thursday’s nearly 3% jump saw a large influx of volume, and increase the likelihood that the resistance breach could have staying power.
The implied volatility rank is low, and at $326, Costco is too expensive for long calls. Thus, I think bull call spreads are the way to go here.
The Trade: Buy the Oct. $330/$345 call spread for around $5.60.
Roku rounds out our trio of stocks to buy with an epic 12% jump on Thursday. More than 25 million shares traded throughout the day, marking its highest volume day since mid-April. That said, many of the biggest gainers on Thursday were those benefiting from the global pandemic. Coronavirus cases are on the rise, and investors seem to be warming up once more to companies like Roku.
Remember, more people at home means more consumers streaming shows via Roku’s media devices.
Additionally, what else excites me about the ROKU stock chart is that it’s just now breaking out of its three-month base. Unlike Apple or Amazon, which have already rocketed into orbit, Roku shares are just now blasting off. And I think it brings the stock’s all-time high of $176.55 as a realistic upside target over the coming weeks.
The Trade: Buy the Sep. $150/$160 bull call spread for around $3.90.
For a free trial to the best trading community on the planet and Tyler’s current home, click here! At the time of this writing, Tyler held bullish positions in AMD.