After opening about flat on the day, the market selloff picked up steam on Wednesday, with the S&P 500 falling more than 2% at one point and the Nasdaq Composite falling 3%. With that in mind, let’s look at a few top stock trades for Thursday.
Top Stock Trades for Tomorrow No. 1: Nike (NKE)
Nike (NYSE:NKE) share gapped up to all-time highs on Wednesday following better-than-expected earnings.
While shares are understandably fading from the day’s highs — given the selling pressure in the overall market — Nike is still looking pretty good.
If the stock can continue higher, look to see if Nike can climb to the 161.8% extension near $133. On the downside, let’s look to see how much of a dip we get in this name.
If it’s mild, I want to see support come into play near the prior highs around $120. Below that will put the 20-day moving average and uptrend support (blue line) in play.
Look to this name to see if Nike has relative strength, given its post-earnings pop.
Top Stock Trades for Tomorrow No. 2: Chewy (CHWY)
In the beginning of September, Chewy (NYSE:CHWY) stock surged to the 261.8% extension, topping out near $75.
After hitting that mark though, the tone changed considerably (and quickly). After earnings, the stock continued to fade, but support came into play near the $52.50 to $53 area.
Chewy was showing decent relative strength on Wednesday, rallying several percent. It’s still up about 2.5% at the time of this writing, and trying to regain the 50-day moving average.
What I want to see now is a weekly-up rotation, where Chewy closes above last week’s high of $57. So far, it has hit that high, but is struggling to close above it. If it can close above that, look to see if it can regain $60 and the two-times range extension near $62. Above it will again puts a move back to $70-plus in play.
On a close below $52, bulls lose most if not all of their short-term momentum.
Top Stock Trades for Tomorrow No. 3: Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) rallied on positive news, as the company readies a Phase 3 clinical trial for its novel coronavirus vaccine.
Fading from its highs on the day, bulls have a solid risk/reward. For now, the 200-day moving average continues to hold as support. As long as shares are above $142.50 on a closing basis, bulls can stay long this name.
What we really need to see is a close above the 20-day and 50-day moving averages. Over $150 will put $155 resistance back in play.
On the downside, a close below $142.50 could put a move toward $136 on the table.
Top Stock Trades for Tomorrow No. 4: Slack (WORK)
Slack (NYSE:WORK) was trading well on the day, up almost 3.5% at one point. However, the stock could not hold those gains, slipping to about flat on the day.
Still, considering the selling pressure in the overall market, flat is not necessarily a bad thing.
In any regard, bulls have a case to be made on the long side. Shares rallied off the post-earnings low, then put in a higher low, allowing an uptrend support mark to form (blue line).
While the basing pattern looks promising, there is a “buyers beware” situation in play, given that the stock is below all of its major moving averages.
These moves take time. While the basing is promising, we really need to see shares reclaim the 200-day moving average, which was resistance on Wednesday. Above puts a gap-fill toward $28 in play, followed by a test of the 20-day and 50-day moving averages. Ultimately, a move above $30 is what we want.
On the downside, a close below this month’s low at $24.21 would be a bad sign. It could put the April low in play near $22.50, followed by $20 if the market selloff really gains steam.
On the date of publication, Bret Kenwell held a long position in CHWY and WORK.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.