Renewed optimism over a calming trade situation between the U.S. and China helped keep things quiet and prices trending higher in the stock market Monday. As a result, it’s time to take a look at the broader markets as part of our top stock trades.
Top Stock Trades for Tomorrow #1: S&P 500 ETF (SPY)
Bulls have renewed hope in the stock market now that the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) has broken over downtrend resistance. While volatility is still elevated compared to 2017, it’s starting to cool off a bit as we work through May.
Should investors hang it up and move to cash? I wouldn’t say that, as earnings are strong and the economy isn’t entering a recession. But reducing longs and cutting down risk wouldn’t be the worst move.
On the chart, we can see where the SPY finally broke over downtrend resistance (blue line). Just below current levels is trend-line support (black line), as well as the 50-day and 100-day moving average.
Top Stock Trades for Tomorrow #2: Russell 2000 (IWM)
Now let’s turn our attention to the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM), which hit new 52-week highs in the trading session.
Interestingly enough, the S&P 500 is still off its 2018 highs by about 5%. According to one chartist, the last time this scenario existed was January 2013. That doesn’t mean the same explosive gains are in store for us over the next 12 months, but it certainly is a check in the “confidence” column.
For the IWM, we want to see it move above $160 and then find this level to be support. For right now though, it looks like that may not play out. If not and the market experiences some selling pressure, shorts can try to ride the IWM down to the $155 level, where plenty of support should come into play and bulls can step in.
Top Stock Trades for Tomorrow #3: Nasdaq (QQQ)
Like the SPY, the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) is also giving investors as bullish nod. However, like the IWM, it too is running into some resistance.
The QQQ has a line of resistance near $170 and it’s looking tired right now. Should it fail to push through, a drop down to $165 would be constructive.
For all three of the ETFs — the QQQ, SPY and IWM — I would actually like to see a pullback. The move over the past five to six sessions has been intense and a pullback and/or consolidation will give them the energy needed to push through resistance and attempt to retest its highs.
Top Stock Trades for Tomorrow #4: Cisco (CSCO)
While it wouldn’t be bearish to see Cisco Systems, Inc. (NASDAQ:CSCO) pull back into moving-average support, bulls surely want to see its former $45 breakout level hold as support.
If it doesn’t, $42.50 should be pretty solid support. Cisco still pays a near-3% dividend yield and has a reasonable valuation.
In my recent experience, I have found a lot of pushback on the concept that Cisco can continue to move higher. But with its business transformation taking shape and a good looking chart, bulls have reason to be excited.
Top Stock Trades for Tomorrow #5: Salesforce (CRM)
Salesforce.com, inc. (NASDAQ:CRM) has been a beast this year. And with the strength in cloud-computing, who can be surprised?
With the industry having strong momentum — ranging from Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN), Workday Inc (NASDAQ:WDAY) and a bunch of others — why bet against CRM now?
Shorts can press their luck on CRM down to the 50-day moving average, good for about $5 per share in profits from current levels. But I wouldn’t want to stick around too long if I were bearish.
Rather than selling CRM after its big rips, I’d rather buy it on the dips. With that said, CRM looks like it’s ready to take a rest. Support could come into play near its prior high around $127. If not, the 50-day and 100-day moving average are attractive levels to step in, two areas buyers have bought out consistently over the past year.
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