Stocks opened lower on Thursday, but the weakness was short-lived. By day’s end, buyers rallied the troops and jammed the S&P 500 Index higher by 0.39%. However, it was the Nasdaq Composite that delivered the largest gain at 0.87%. The rapid-fire comeback from what could have grown into a second consecutive losing session continues the post-election pattern of shallow selloffs. And it has me in the mood to shop for more stocks to buy.
Overall, this week’s performance offers a handful of big winners. And now, we’re spotlighting three of the best. To find them, I simply sorted a watchlist of the most liquid stocks on Wall Street by percentage change. All three found themselves in the Top 25.
But, rather than take the lazy route by merely grabbing the top three, I narrowed it down to those with the best looking trends and most reasonable entry points.
That said, here’s who made the final cut:
Let’s take a closer look at Thursday’s pop and how it plays into the context of their overall uptrends.
Stocks to Buy: Roku (ROKU)
Thursday’s Gain: 10.21%
Roku notched a new closing high on Friday at $263.14. It’s also up 96.5% on the year, placing it in the upper echelon of market performance. The earnings announcement on Nov. 5 had shareholders dancing in the streets due to the massive beat. The stock had already soared in the previous quarter, but the gains still underrepresented the boom in earnings and sales.
Moreover, Thursday’s launch corrects the quick pullback seen after the report, and marks a clear breakout over a key short-term resistance zone at $240. Roku has a history of fantastic follow-through after breakouts, and I see no reason why this one won’t behave similarly.
At $263, the higher price tag justifies using spreads over purchasing calls outright.
The Trade: Buy the Jan. $260/$280 bull call spread for $7.25.
Zillow (Z)
Thursday’s Gain: 7.09%
Zillow took a hit alongside homebuilding stocks during the correction preceding the election. Fortunately, the breakdown was a ruse, and Z stock is back to courting new highs. The rebound was aided by a better-than-expected earnings report from earlier in the month.
Thursday’s pop signaled the next upswing has begun. It came right as the 20-day and 50-day moving averages were pressing up against the pullback. In other words, bulls emerged in the nick of time to stave off a more significant retreat. With the gain, Z stock is now on the verge of breaking through short-term resistance near $110.
Once again, bull calls present an attractive low-risk spread for gaming further upside.
The Trade: Buy the Jan. $110/$120 bull call for $3.80.
Stocks to Buy: Advanced Micro Devices (AMD)
Thursday’s Gain: 3.63%
Advanced Micro Devices is not a stock you want to miss out on when it wakes up. It rounds out this list of stocks to buy with a pattern worth pursuing. Previous multi-month bases have given way to massive rallies, and I expect the current formation to behave likewise.
Thursday’s rally brings AMD stock one step closer to testing old resistance pivots. The volume increases suggest institutions are wading back in, and I think it makes bull trades worth a shot.
The record high at $94.28 is the logical first target. Beyond that, and $100 comes into play. And with a holiday-heavy stretch looming, implied volatility is currently in the tank. That makes call and call spread purchases tempting.
The Trade: Buy the Jan. $90/$95 bull call spread for$1.50
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.
For a free trial to the best trading community on the planet and Tyler’s current home, click here!