Stocks to buy for the short-term – September 05

The S&P 500 has bounced back sharply from its support levels of 2420 and is close to making new lifetime highs. The index is in a strong uptrend and has maintained its higher high and higher low formation. Therefore, we want to buy a few stocks with momentum, which are likely to offer us a good risk to reward ratio.

Key points

  1. The S&P continues to be in an uptrend and will gain further if it breaks out to new lifetime highs
  2. We want to capitalize on the momentum in the markets
  3. Buy stocks with a strong momentum in their favor with reliable chart patterns
  4. Buy BIIB
  5. Buy CRY
  6. Buy TD
  7. Buy BGNE

However, please keep the allocation size small because of the uncertainty about the market’s reaction following the North Korean nuclear test over the weekend. All these positions are speculative in nature, therefore, respect the stop losses and trail profits higher, as and when the stock moves in your favor. Please don’t take the trades if the S&P 500 falls more than 1% today.

Biogen Inc.  – (NASDAQ: BIIB), Buy 321, SL 300, Target 376

Weekly chart

BIIB had been in a strong uptrend from 2010 to March 2015. During that period, the stock rose from $40 to $442, a gain of more than 1000%. Since then, the stock has been in a correction, which ended just above the 61.8% Fibonacci retracement levels. Thereafter, the stock went into a consolidative phase for about a year.

Last week, the stock broke out of the range, which shows that the bulls have overpowered the bears in the near term and the stock is likely to resume its uptrend once again. Let’s determine its entry, stop loss and target levels from the daily chart.

Daily chart

BIIB has closed above the upper end of the range for two days in a row. Therefore, we expect it to now rally towards its target objective of $376. We can buy the stock at the current levels and keep a stop loss of $300, initially. We have kept a close stop loss because we don’t want to stick with the stock if it again falls back into the range. Please trail the stop higher once the stock moves in your favor. The stock has a good risk to reward ratio and is also backed by favorable news and strong results.

CryoLife – (NYSE: CRY), Buy 21.5, SL 18.5, Target 26

Weekly chart

CRY had been stuck below the $16 levels for almost 14 years, before breaking out in August of last year. However, it could not sustain the highs and dropped back to $14 levels in April of this year. Nevertheless, since then, the stock staged a sharp comeback and had been hovering between the $18 to $20 levels for the past few weeks. Last week, the stock staged a sharp breakout above the $20 levels and is likely to rally higher, with no major resistance in sight. What are the critical levels to watch on it?

Daily chart

The stock has formed an inverse head and shoulders pattern, which is a bullish formation and it has a pattern target of $26. The stock can be purchased at the current levels and on any pullback towards the $20.2 levels. The stop loss can be kept at $18.5 levels, which is just below the lows formed on August 24. The risk is $3, whereas the minimum profit objective is $4.5 on each share.

Toronto-Dominion Bank – (NYSE: TD), Buy 54.5, SL 51, Target 61

Weekly Chart

TD has been in an uptrend since 2002 with major corrections in 2009 and 2015. The stock had been finding it difficult to breakout of $53.5 levels since 2014. Subsequently, the stock ended up forming a cup and handle pattern on the weekly charts. Last week, the stock broke out of the formation and has turned bullish. The long-term pattern target for the stock is $74. However, let’s check the short-term targets and entry point from the daily chart.

Daily chart

The stock gapped up on August 31 and broke out of the bullish cup and handle formation. It continued its journey northwards on Friday also. In the short-term, the stock is likely to rally to $61 levels. We can buy the stock at the current levels and keep a stop loss at $51, just below the moving averages. We risk $3.5 whereas our profit objective is $6 for every share.

Beigene – (NASDAQ: BGNE), Buy 75, SL 65, Target 95

Weekly chart

BGNE had been trading in a range for most of last year. It gradually started moving higher in 2017 and spurted in June and July of this year. The stock went from under $40 to about $80 levels within six weeks. Since then, the stock had a shallow correction, which ended just above the 38.2% Fibonacci retracement levels. This shows the strength in the stock. If the stock can breakout to new lifetime highs, it can rally to $105 levels. However, we want to only capture the short-term momentum in the stock.

Daily chart

The stock had been stuck in a small range for the past few days, unable to cross above $72 levels. However, on Friday, the stock rallied sharply and broke out of the overhead resistance. It is now likely to move towards $80, which has been a major resistance twice in the past.

A breakout above $80 should see the stock gather momentum and surge ahead. Therefore, we want to take a preemptive trade with 50% allocation size at the current levels and buy the remaining once the stock breaks out of $80. The stop loss can be kept at $65. Our target objective is $95 in the short-term. Therefore, the risk is a total of $10 for a profit of $20 when purchased at $75. For the buy taken at $80, the risk is $15 for a profit of $15.

Rakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.