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Don’t let this week’s sleepy price action in the S&P 500 to cheat you. The bulls were pressing their bets a lot before the holiday weekend. Sometimes their antics are on full display when you watch the S&P; other times you have to dig a little deeper. In today’s article on Buy Breakout Stocks, I’ll highlight the areas that have seen some inflows this week and that are catching my attention. Next, I’ll disclose three of my favorite stocks to trade.
Semiconductors have been one of the growth engines in the tech industry over the past year. The growth spillovers put them on the ropes, but they made a comeback this week that helped the Nasdaq return to an uptrend. Small caps have also woken up. The Russell 2000 Index outperformed the S&P 500 and is now well above its 50-day moving average. Finally, momentum stocks are starting to rise from their ashes.
Taken together, these developments indicate improving market health and should give buyers the confidence to increase their exposure. Here are three actions to consider:
- Take-Two interactive software (NASDAQ:TTWO)
- Snowflake (NYSE:SNOW)
- Newmont mining (NYSE:NEM)
Let’s take a closer look at each setup.
Breakout stocks to buy: Take-Two interactive software (TTWO)
Two weeks ago, I would not have touched TTWO. Its price chart was decreasing and better configurations were appearing Activision Blizzard (NASDAQ:Mountain biking) and Electronic arts (NASDAQ:EA). But the response to his quarterly report changed everything. And, he leads the list of breakout stocks to buy.
Prices and volume surged, pushing TTWO from the lower end to the upper end of its three-month trading range in a single limit.
Since then we have created a clean and high basic training. Day after day, we nibble on overhead while digesting big gains. At the same time, overbought pressures are easing.
Look for a break above $ 188.50 to signal the start of the next step. Then pull the trigger on bullish trades. With the implied volatility in the tank after profits, I like to buy vertical calls here.
The exchange: Buy the August $ 190 / $ 200 Bull Call Spread for $ 3.00
You risk $ 3 to win $ 7.
Snowflake’s price chart has been resolutely bearish throughout the year – until now. With the strength of this week, the once high-flying software company is now above its 50-day moving average. I didn’t find his results announcement that interesting. But the market has spoken and it is a message that I cannot ignore.
Yesterday’s high volume rally engulfed the previous five trading sessions. He also went through an area of impenetrable resistance for over two months. This is actually the first breach of a cap we’ve seen since the SNOW stock broke the high last December. I suspect that many bears are afraid, given the change in character.
Since the trend reversal is still in its infancy, I prefer higher probability cash flow trades than aiming for the moon with an aggressive bet. If you think SNOW may stay above $ 200 next month, enter the next spread.
The exchange: Sell the July $ 200 / $ 195 bull put for 65 cents.
You risk $ 4.35 to win 65 cents. However, the loss will be much less if you come out with a $ 200 break.
Breakout shares to buy: Newmont Mining (NEM)
The latest entry in our breakout stocks is in an area that’s no stranger to strength this year – gold stocks. Inflation worries are pushing up precious metals and gold miners have been the big beneficiaries. After hitting a new 52 week high, NEM quietly coiled into a narrow range. The volume remains moderate. This indicates that we are witnessing a profit taking of garden varieties and not a mass exodus. The break allows the 20-day moving average to reduce catching and overbought pressures.
Now is the time to prepare the trades for the next breakout. I like to use $ 75 as a trigger point.
The exchange: Buy the August Vertical Call for $ 75 / $ 80 for about $ 1.40.
The cost of the spread will be slightly higher if you wait for NEM to clear resistance first.
At the date of publication, Tyler Craig did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
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