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Last week's pause in the S&P 500 allowed many stocks to build out beautiful bullish chart patterns. In today's gallery, we will feature three of the best stocks to buy now.
Traders looking for a catalyst behind the market's recent upside reversal need look no further than the path of interest rates. The residents of the Street are now pricing in three quarter-point rate cuts by Christmas. This is a massive turn in expectations relative to what carried us into 2019. Back then forecasters were looking for multiple rate hikes , not cuts, for the year.
Provided the economy doesn't completely fall apart, easy money policy could be the engine driving the next leg of our bull market.
Against this bullish backdrop, here are three of the best stocks to buy.
3 of the Best Stocks to Buy Now: Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ: AMD ) clinches the top spot of today's selections for one simple reason. It has the cleanest setup with the best risk/reward offer of the bunch. For starters, the uptrend has been longlasting and consistent. Short of one hiccup, we've seen every dip bought and every breakout chased. In other words, buyers are behaving themselves and acting predictably.
Volume during last week's retreat was average, lacking any urgency or signs of distribution. Also, the trend's momentum increased on the last upswing, suggesting bulls are still very much in control of the landscape. With multiple support zones looming beneath, the turn higher in AMD stock appears imminent.
To capitalize, either sell the July $28 puts for around 90 cents or buy the Aug $30/$35 bull call spread for $1.76. The first trade offers a high-probability cash flow play, and the second is a more aggressive, directional play with more potential reward.
This month's rally in Amazon (NASDAQ: AMZN ) was enough to turn its short-term trend higher. Heading into June, the tech titan sat below every major moving average. Now it's above all of them. AMZN stock is up 1% this morning and testing the high of the sideways base that formed last week. Consolidation zones like this allow stocks to digest recent gains and set the stage for sustainable upswings.
A break above the upper end of the range at $1,890 could signal the next upswing is upon us. April's high of $1,964 is the next logical upside target.
With implied volatility at the lower end of its one-year range, long premium plays offer a better risk/reward than short ones. Couple that with the lofty price tag of AMZN shares and I think call vertical spreads are the way to go. Buy the Aug $1,900/$1,950 bull call spread for $23. The risk is $23, and the potential reward is $27.
The chart of Lyft (NASDAQ: LYFT ) is finally providing hope to shareholders tiring of the beatdown. Since bottoming at $47 in mid-May, shares of the ride-hailing service have climbed a respectable 31%. The rebound has been sufficient to carry LYFT stock back above both the 20-day and 50-day moving averages. It also places the company's shares on the cusp of completing a rounded bottom pattern which would support higher prices for weeks and even months to come.
$63 is the spot to watch. It has acted as resistance multiple times over the past two months and marks the ceiling that needs to be cleared before the bottoming pattern is completed. The next resistance zone doesn't come into play until $75, so LYFT has plenty of room to run.
Buying the Oct $65/$70 for $1.40 offers a cheap upside bet. Your risk is limited to the initial cost of $1.40, and the reward is $3.60.
As of this writing, Tyler Craig held bullish options positions in AMD. Check out his recently releasedBear Market Survival Guideto learn how to defend your portfolio against market volatility.
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