After a rocky start, many equities bounced off the morning lows on Monday. With that in mind, let’s look at a few top stock trades for Tuesday.
Top Stock Trades for Tomorrow No. 1: American Airlines (AAL)
American Airlines (NASDAQ:AAL) and its peers came under heavy pressure on Monday. That’s as Warren Buffett says he has exited his positions in the airline industry.
Before Monday, AAL stock had a 52-week low of $9.09. On Monday, shares dropped as low as $9.15 before reversing higher. The fact that the low is holding for now is encouraging.
However, that doesn’t mean it will continue to do so. A close below $9.09 would be discouraging for AAL stock and drop the stock into no man’s land until this level is recovered.
If it holds, the bulls will have something to cling to. On the upside, though, we want to see shares close above the 20-day moving average and end its streak of lower highs (purple lines). That would be a very encouraging development.
Top Stock Trades for Tomorrow No. 2: United Airlines (UAL)
United Airlines (NASDAQ:UAL) has a similar look. However, unlike American, United is not testing its lows. In fact, the stock continues to put in a series higher lows.
It would be very bullish to see the stock reclaim last week’s high over $31.84. Doing so this week is unlikely, but it would also thrust the stock over the 20-day moving average and end its streak of lower highs, as it’s wedging into a tighter and tighter range.
UAL becomes a risk-off situation should it break below $21.50, though. It will put the double-tap low of $17.80 in play, which was hit in back-to-back sessions in late March.
Top Stock Trades for Tomorrow No. 3: Lyft (LYFT)
The writing was on the wall with Lyft (NASDAQ:LYFT). Obviously we did not know it was going to drop nearly 9% on Monday.
However, Friday’s 9.8% decline was a devastating blow. That should have shaken out short-term longs, as a number of levels were violated. Lyft blew through its 38.2% retracement, 20-day and 50-day moving averages and out of its rising wedge formation.
While this alone did not mean doom was headed its way Monday morning, it meant that there was no reason to be long on this name.
It now puts the 23.6% retracement near $24 in play. Below that, and $22.50 is likely. Remember, this name rallied more than 140% from the lows, so some unwind can be expected.
On the upside, however, look for the 20-day and 50-day moving averages to act as resistance.
Top Stock Trades for Tomorrow No. 4: Alibaba (BABA)
Alibaba (NYSE:BABA) had a nice consolidation channel going for it (blue lines). Amid that mellow pullback, shares were finding support at the declining 50-day and 20-day moving averages.
By most accounts, Alibaba stock looked relatively bullish. However, like Lyft, bulls should have been shaken out with Friday’s decline.
Yes, the 200-day moving average and 38.2% retracement held as support. However, to break below so many patterns and key levels should have been enough to force many long traders to exit. Now these levels are breaking as well, putting $180 in play.
It’s too early to look at $170 without $180 being violated, but that would be the next level down below that. From here, bulls should bide their time until BABA either declines further into support or reclaims the 200-day moving average and the 38.2% retracement.
Back over this area could put the 50-day moving average and $200-plus on the table.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, he did not hold a position in any of the aforementioned securities.