The market opened higher and rallied hard, then reversed lower on the day. It was a brutal blow for bulls that were looking for some type of upside move to undo some of the technical damage of the past few days. With that in mind, let’s look at a few top stock trades for Thursday.
Top Stock Trades for Tomorrow No. 1: S&P 500 ETF (SPY)
Click to Enlarge
I had a little bit of a problem with Wednesday’s huge gap-up, but was willing to adjust to the situation at hand. That adjustment was mainly that Wednesday’s breadth was quite strong through the first few hours of the day, while stocks like Apple (NASDAQ:AAPL) churned to new highs.
However, before the opening bell, it bothered me how poor the breadth was on Tuesday, with a near-90% downside volume day. That followed the 90% downside day we had on Friday.
This morning I said that I would have preferred a lower open, down toward the 50-day moving average and breakout area near $454 to $455. It would have been much healthier this way.
In any regard, here we are and the action is not that surprising. The tell came when the SPY couldn’t reclaim and hold above the 10-day and 21-day moving averages. From here, the $454 area needs to hold as support. If it does, the $460 area could be back on deck.
Below the 50-day moving average, and it’s possible we see further selling pressure.
Above this week’s high (Monday’s high), and the $471 resistance area is in play.
Top Stock Trades for Tomorrow No. 2: Salesforce (CRM)
Click to Enlarge
Salesforce (NYSE:CRM) stock is getting creamed on the day, down nearly 12% after the company reported earnings.
I thought it would be a long shot to fill the gap at $260.36. In fact, that was kind of my “worst case scenario” expectation for this company. Turns out, the market had even more pain in mind.
Now cruising lower, investors have to have their eyes on the 200-day moving average. Below that, and the 50-week moving average and weekly VWAP measure are on the table.
On a rebound, though, let’s see if CRM stock can reclaim Wednesday’s low and power back up into the $265 to $270 resistance again. Above that puts its post-earnings high in play near $277, then the gap-fill level.
Top Stock Trades for Tomorrow No. 3: Costco (COST)
Click to Enlarge
Costco Wholesale (NASDAQ:COST) has been such a beast lately. The stock continues to climb higher despite some of the turbulence in the market and its relative strength is becoming a staple observations among traders.
However, if we can’t reclaim Tuesday’s low and the 10-day moving average, then a test of the 21-day moving average may be on tap. That’s despite how strong this stock has been and despite how long we went without a test of the 10-day until yesterday.
Still, the benefit of the doubt rests with the bulls on this one. Costco has been strong and so has the relative strength. Let’s keep an eye on this one.
Top Trades for Tomorrow No. 4: AMC Entertainment (AMC)
Click to Enlarge
AMC Entertainment (NYSE:AMC) is now lower for a sixth-consecutive session and has not been trading well lately — obviously.
Below all of its major moving averages, we’re now getting our first test of the 200-day moving average in a long time. That comes as the stock breaks below the $33.74 level and last month’s low at $32.75.
From here, we have to see if the stock can reclaim the 200-day. If it can, then the prior zone I just spoke of — $32.75 to $33.75 — could be back on the table.
If AMC can’t reclaim the 200-day, then the third-quarter low at $28.91 could be in play, along with the 50-week moving average and the weekly VWAP measure.
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.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
