5 Top Stock Trades for Monday Morning — Trading the Big Banks
We finally — finally! — got a bounce in the stock market on Friday. The only question is whether it will hold up now and how it will handle some of the key levels these indices broke down from. We also got some big earnings reports from the banks, which kick off our must-see stock trades list. Read on to find out the best stocks to invest in Monday morning.
JPMorgan
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A big earnings beat and very solid results from JPMorgan Chase (NYSE:JPM) make the post-earnings fall rather disappointing for bulls.
The fact that it comes after several down days is more disappointing, and even more so on a day where U.S. stocks are actually sporting some gains. Finally, it’s coming at a time where rates are rising and the yield curve between long and short rates are improving rather than flattening.
All of that makes this a tough pill to swallow and while this type of earnings reaction isn’t unusual for JPM and the banks, it will become concerning if the banks continue to tumble lower.
We should know soon enough whether that will be the case. JPM is approaching range support between $102 and $104. Further, the backside of prior downtrend resistance (blue line) comes into play in this range. This downtrend has played a significant role since March, so failing to hold this level as support would be a big concern.
On a rebound, we need to see JPM get back above the 200-day. A rally to the 200-day and fail would be a bad sign as well.
Citigroup
Citigroup (NYSE:C) also beat on estimates and reported pretty good quarterly results.
We saw C initially pop, then fail at its 200-day and essentially hit its prior day lows. Short-term bulls need C to stay above these lows now (little orange line on the chart). Below that and the bottom of its range is in play, likely near $65.
Wells Fargo
Like C and JPM, Wells Fargo (NYSE:WFC) reported earnings on Friday morning, but unlike JPM and C, WFC missed on earnings per share expectations.
Surprisingly — or maybe not for this type of market — we’re seeing the stock rally as a result. Shares bounced perfectly off that uptrend support and that’s great for bulls. It creates a very easy-to-spot line in the sand.
Above $51 and we can stay long, while using a stop-loss at or just below the 2018 lows (dashed line).
Box
Box (NYSE:BOX) has been absolutely decimated. That’s despite its low market cap, A.I. in the cloud product benefiting from secular growth, +20% annual revenues and its turn to profitability and positive free-cash-flow.
Shares have fallen from $29 to $19 very rapidly and it’s still one of my favorite long-term small caps. I really can’t explain the rapid decline other than to say that BOX simply got caught up in this week’s carnage.
For longer-term investors, I would feel comfortable dipping a toe in the water near these levels. It would be more encouraging to see BOX over $19.50, but at the very least a return to its 20-day moving average — currently north of $21.50 — should be in the cards.
Sustained downside below its March lows (dashed line) would be a concern. But just look how fast it bounced back from that decline.
iQiyi
People are calling me crazy about liking iQiyi (NASDAQ:IQ) lately and even looking for a “spec play” in this environment seems nuts. Sort of like Canopy Growth (NYSE:CGC) though, look at how well “the Netflix (NASDAQ:NFLX) of China” has been doing.
Sure it broke below $25 support the other day, but it recovered the level quickly and just hit $26. This name, despite the poor reputation of Chinese stocks right now, continues to trade pretty darn well.
I wouldn’t leverage my IRA into it, but for those who have the capacity for a small speculative play, IQ might be worthwhile.
Guessing on the entry is not advisable. Instead, look to see if IQ can break over the 20-day and then the 50-day moving average. If so, a rally toward $30 could be in the cards.
Conversely, investors can buy near $25 support but realize that the stock is being squeezed lower. That means either support or resistance needs to give way and those investors who don’t want to guess should wait for one or the other to happen first before making their move.
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Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long BOX, IQ and JPM.
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