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Wednesday's market moonshot was a bear killer and that gives us a good reason to seek stocks to buy. We finally saw strength return to growth stocks as the Nasdaq Composite led the charge with a 3% gain that pulled the Index back above the 200-day moving average. The S&P 500 followed suit with a break above its 200-day as well.
Short-sellers hoping for a short-lived oversold bounce are extremely disappointed by this rally's longevity. Since bottoming seven trading sessions ago, the S&P 500 has rebounded an impressive 8%.
The high volume accompanying yesterday's run should worry bears because it suggests institutions are wading back into the waters. Their continued sponsorship could spell the end of this market correction.
To provide fodder for buyers, I've scoured the market for stocks exhibiting relative strength. They held up well during last month's bloodbath, and two of the three scored strong bullish reversals yesterday.
Check out these three relative strength stocks to buy.
Not all tech stocks were thrown out with the trash last month. Some were able to hold firm amid the selloff, maintaining their weekly uptrends and their status among ideal stocks to buy in November. Microsoft (NASDAQ: MSFT ) is one such example.
Note how MSFT stock buyers swarmed to defend the 200-day moving average and the psychologically significant $100-level. The 12% rally that followed has all but recovered all that was lost in October. Yesterday's high volume session delivered a breakout above the trendline that has defined MSFT stock's descent, as well as the 50-day moving average.
Microsoft is now well poised to reclaim its prior peak at $116.
Buy the Jan $110/$120 bull call spread for $4.
Mastercard (NYSE: MA ) stock's behavior has closely mirrored that of MSFT. I actually like the fact that MA stock broke the 200-day moving average right before earnings, as it served as a bear trap that could add further fuel to this budding recovery. Essentially, anyone who shorted the breakdown is now getting squeezed and is therefore liable to buy to cover stop the pain.
Yesterday's high volume surge carried it back above its descending trendline creating a potential higher high in the process. A pop above the 50-day overhead could signal Mastercard's eventual retest of the highs near $225.
Buy the Jan $210/$220 bull call spread for $4.
Thanks to a solid earnings report, Twitter (NYSE: TWTR ) exited October's drama unscathed, which helps position it among the stocks to buy in November. Its behavior post-earnings has been particularly admirable because upside follow through has allowed TWTR stock to reclaim the high ground above all its major moving averages.
Over the past week, a high base pattern has formed. I consider this a bullish omen as it is allowing TWTR stock to digest its gains and build a base for further gains.
Key horizontal resistance looms overhead at $36. If the blue bird can break above it, consider pulling the trigger on bullish trades. I like selling the Dec $21 puts here.
As of this writing, Tyler Craig didn't hold positions in any of the aforementioned securities. Want insightful education on how to trade? Check out his trading blog, Tales of a Technician.
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