The backdrop for equities remains strong, and you don’t need a doctorate in economics to understand why. Money is cheap, consumers are flush with cash and the economy is booming. Together, these three factors are delivering record-smashing profits to corporations across the land. As a result, finding stocks to buy doesn’t require much legwork. Throw a dart, and you’ll likely hit something with bullish technicals.
But even the best trends ebb and flow.
For short-term traders, timing is the name of the game. No one wants to buy a stock right before it sinks for two weeks. The best trades are those that move into positive territory from the get-go. And that requires a discriminating eye that knows how to weed out the good and the better in search of the best.
I’ve engaged in just such an exercise and found a half dozen tempting targets. For brevity’s sake, I’m sharing my top three below. They are all a stone’s throw from all-time highs and carry compelling technical and fundamental characteristics.
- Lululemon Athletica (NASDAQ:LULU)
- Apple (NASDAQ:AAPL)
- Snap (NYSE:SNAP)
After a quick take on their current chart setups, I’ll outline a top-shelf options trade idea to consider.
Stocks to Buy Now: Lululemon Athletica (LULU)
Lululemon stretched to a new record last week and is now providing an easy buy-the-dip setup. The trend is clean and consistent, with rising moving averages across the board. What’s perhaps most compelling is the volume confirmation. Accumulation days pepper the landscape and are reflective of steady buying from institutions. By comparison, the two-day decline that prompted today’s idea saw minimal participation.
It’s the type of pullback born of garden variety profit-taking and not death-dealing distribution. We’re going on 2.5 months now where dips have been easy buys, and I see no reason to doubt the trend now.
Some may find the higher price tag a hurdle, but we can use options to shrink the trade cost drastically. A simple bull call spread should do the trick.
The Trade: Buy the September $400/$420 bull call for $7.
Apple needs no introduction. And don’t let Wednesday’s lackluster earnings response fool you. The technology titan utterly destroyed expectations. Revenue was up 36% year-over-year to over $81 billion for the quarter. iPhone sales topped $39 billion, up nearly 50% year-over-year. Services were up 33%, and its other products segment was up 40%.
These are the type of growth metrics you see with companies in their infancy. The fact that Apple can do this when it’s already worth $2+ trillion is absurd.
If its share price hadn’t galloped from $125 to $150 ahead of the report, you can bet we would have had a more bullish response. As is, though, Wednesday’s 1.22% slip did nothing to change the appeal of its overall trend. We’re building a nice little base just beneath $150 that’s setting up a potential double top breakout.
The cautious investor might wait for a push past resistance ($150) to confirm the next up-leg has begun. But, I don’t mind entering now. Bull calls offer the best risk-reward.
The Trade: Buy the October $145/$155 bull call for $3.70.
Stocks to Buy Now: Snap (SNAP)
Snap rounds out our stocks to buy a gorgeous power-gap after earnings. The single-session 20% pole vault jammed prices to a fresh record. Volume exploded past 115 million shares. This wasn’t some small-fry affair but an institutional-led buying fest that shows the big boys want a piece of the camera app company’s growth.
A two-bar pullback carried prices into Wednesday’s session, and the profit-taking could have continued, but it didn’t. Two sessions were apparently enough to bring new buyers to the yard.
Shallow retreats like this are bullish and speak to just how aggressive buyers are becoming. SNAP stock closed up just shy of 3%, and I think we’ll see continued upside in the weeks to come.
The Trade: Buy the October $75/$85 bull call spread for $3.75.
On the date of publication, Tyler Craig was long SNAP. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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