What a difference a day makes. After the jobs report crushed expectations — adding 312,000 jobs vs. expectations for just 180,000 — and after Fed chair Jerome Powell made some dovish comments, U.S. stocks went into rally mode. The Dow Jones Industrial Average and S&P 500 climbed 3.5%, the Russell was up almost 4% and the Nasdaq was up 4.5%. Let’s look at some top stock trades after the move.
Click to Enlarge Blazing higher by about 9%, Netflix (NASDAQ:NFLX) was a big winner on the day. Its viral “Bird Box” hit and conviction buy recommendation from Goldman Sachs analysts is like gasoline on the fire on days like this.
Shares are quickly up almost 30% from just a few sessions ago. Those who bought on that near gap-fill are sitting pretty with some big-time gains. Bursting over the 50-day moving average on Friday, those who recently got long can use this level as their stop-loss. This will help prevent a winning trade turning into a losing trade.
Should the rally continue and overall markets stay hot, a run-up to the $320 to $330 level is possible. That’s assuming NFLX can get through $300. There’s a lot of hype around Netflix right now, so reaching the 200-day moving average isn’t out of the question if stocks maintain momentum.
On a pullback, I want to see the $260 to $265 level hold.
Nasdaq ETF (QQQ)
Click to Enlarge The PowerShares QQQ ETF (NASDAQ:QQQ) is erupting on Friday, up almost 5%. Thursday’s selloff made it feel like we were going to retest the Christmas Eve lows, but Friday’s rally looks a whole lot better.
The QQQ is putting in a strong performance and a test of $160 is more than possible. That is assuming the ETF can push through its 21-day moving average. This mark has not been strong resistance or support, but shows the general trend has been lower over the past quarter.
The 50-day, though, has been tough resistance for the past few months, after spending several months acting as support. Currently, at $162.75, I would expect resistance near this mark, at least on the QQQ’s first test.
Remember, we can play for these big rallies, but we have to be open to bearish and bullish setups in a tape like this. There’s still plenty of overhead resistance — even above the 50-day.
Click to Enlarge Ford’s (NYSE:F) bounce isn’t all that surprising, given the weekly trend-line support level that was in place. But now what?
I do feel that Ford is oversold, but the automakers are not where investors want to hide out during times of economic uncertainty. The jobs report and the Fed should ease those worries though — at least temporarily — possibly giving Ford an opportunity to rally.
If it can push through the 10-week moving average, it will have a shot at that $9 to $10 area, which should act as resistance.
Keep in mind, we have earnings later this month and the press portion of the Detroit Auto Show starting Jan. 14.
That didn’t help Ford much last year, but keep in mind the stock was also north of $12 at the time. Ford would be worth a shot on a retest of downtrend support.
Click to Enlarge Alibaba (NYSE:BABA) was also a huge winner on Friday, jumping over 6%. It helped hammer home the bottom near $130 and helped the stock avoid a serious breakdown. Now rallying, bulls can use that level to shoot against on the downside.
Not that $140 is a super significant level, but over this mark and perhaps BABA can get some momentum behind it. The problem? Chinese equities all depend on improving relations between the U.S. and China.
With a meeting on tap, BABA is setting up as a binary event. Should it work out poorly, see if $130 holds as support. Upside could send Alibaba to $155.
Remember, it’s okay to watch a stock and not trade it.
Click to Enlarge How many times do I have to say buy Twitter (NYSE:TWTR) near $26? I’m this close to putting those annoying clapping emojis in between the words to drive home this point, just like users (ironically) do on Twitter.
Just like in trending stocks, we buy or sell at key trend-lines until the pattern fails. In October, we said investors could buy a dip down to $26 to $26.50. A few weeks ago, we said $27 was in the cards and pointed it out as a possible support level.
At $30, Twitter’s not unattractive, but it is less attractive following a big rally. If it consolidates down into the $28s, it may be a worthwhile buy for longs. But I wanted to highlight Twitter because it’s important to know levels and it’s important to have a game plan coming into each trading day.
More so, it’s important to identify low-risk/high-reward setups. In Twitter’s case, buying at $26 or $26.50, we could risk ~50 cents a share to try and make $2 to $4 per share in profit. That’s a worthwhile trade and a concept investors need to keep fresh in their mind.