Top 10 Stocks to Watch: December 2023

Our monthly hot list includes some Mongo new entries!

• Last month's article highlighted a significant buying support level around $4,100, with buyers stepping in above this level in late October, leading to a rally through most of November, although buying pressure has recently started to diminish. 
• The market has shown strength in the last three weeks, suggesting potential continued buying pressure from the $4,550 level, but resistance is expected to be around $4,630. 
• If sellers gain dominance in the coming weeks, they may target the $4,500 level, and possibly push down to $4,420 to test the support established by the recent weeks of buying. 

In last month's article we discussed the significant buying support level around $4,100.

At the end of October, we saw buyers step back into the stock market at just above the $4,100 level and we have since rallied through the bulk of November. Only now, at the end of November, are we seeing buying pressure cool off and sellers start to test the waters. 

What's the next resistance band for the S&P 500?

We’ve come a long way this November and a test of the downside from here makes sense. However, the market has been acting so strongly over the last three weeks that continued buying pressure from the $4,550 level cannot be ruled out. 

The next resistance band to test above our current price level is around $4,630. Look for buyers to target this year-to-date high next. If, on the other hand, buyers have lost their steam in the short term, look for sellers to take over in the next week or two.  

Sellers will look to target the $4,500 level below the current price action. As December progresses, and if sellers take over, it’s possible that sellers will want to attempt a push back down to the $4,420 level, to test the support created in the last three and a half weeks of buying. 

We reference the implied volatility rank (IVR) and monthly IV calculation for this article from the tastytrade trading platform. The equities selected for this list have tight and liquid options markets at the time of writing. It is important to execute trades for opportunities that fit with your trading style and account size. Timing is a valuable tool for successful trading strategies. 

A note on earnings trades

Earnings trades can be executed the day before or the day of the earnings event. However, earnings trades can also be placed days or weeks before an earnings event, which could lead to early profit taking before an earnings event. Evaluate each trade in a way that allows you to execute the strategy you would like to execute.  

For many of these trades, if you would like to place a trade going into earnings, you have the option to start the position in November options contracts, leaving you the opportunity to roll the position out to December options contracts after the earnings event if you need to defend the position by collecting more time and premium.  

Top 10 stocks to watch in November 2023

1. MongoDB (MDB) - 12/5 - Earnings release after the close 
2. C3.ai (AI) – 12/6 - After the close 
3. Chewy (CHWY) – 12/6 - After the close 
4. DocuSign (DOCU) – 12/7 -After the close 
5. Adobe (ADBE) – 12/13 - After the close 
6. Costco Wholesale (COST )– 12/14 - After the close  
7. Accenture (ACN) – 12/19 - Before the open 
8. FedEx (FDX) – 12/19 - After the close 
9. Micron Technology (MU) – 12/20 - After the close 
10. Nike (NKE) – 12/21 - After the close 

1. MongoDB

MongoDB (MDB) is a technology company that specializes in database solutions, offering a popular NoSQL database program of the same name. Their platform is known for its scalability and flexibility, catering to a wide range of applications from startups to large enterprises. MongoDB's services are widely used in cloud computing and big data analytics. 

MongoDBis currently trading at $403.19, up 102.15% from its opening price of 2023 at $199.45. The current IVR on the tastytrade platform is 42.9. The IV in December's contract is 76.3 and January's contract is 56.7. MDB has not reported positive net income in any of its last five quarterly reports. 

MDB is an expensive stock and requires a significant amount of buying power to establish undefined risk positions. For that reason, I suggest most traders use defined risk positions. One standard deviation, five-dollar-wide iron condors set up well and can be made narrower to take on more risk. Directional spreads are also set up well and more deltas can be added to take on more risk. 

2. C3.ai

C3.ai (AI) is a provider of enterprise AI software. The company's suite of products offers scalable and practical AI tools to a variety of industries, including energy, manufacturing, and healthcare. C3.ai is recognized for its comprehensive approach to integrating AI into business processes. 

AI is currently trading at $29.19, up 155.38% from its opening price of 2023 at $11.43. The current IVR on the tastytrade platform is 19.5. The IV in December's contract is 102.3 and January's contract is 81.7. AI has not reported positive net income in any of its last five quarterly reports. 

AI is a small enough product that undefined risk positions can be executed with a relatively smaller amount of buying power needed compared to more expensive products. 18-delta short strangles set up well. 35-delta, five-dollar wide, directional spreads also set up well.  

3. Chewy

Chewy (CHWY) is an online retailer of pet food and other pet-related products, known for its wide selection and convenient home delivery. The company has gained popularity for its customer-centric approach and subscription-based services. Chewy's platform offers products for a wide range of pets, including dogs, cats, fish, and reptiles. 

CHWY is currently trading at $18.63, down 50.95% from its opening price of 2023 at $37.97. The current IVR on the tastytrade platform is 86.5. The IV in December's contract is 114.8 and January's contract is 78.6. Chewy reported positive net income in one of its last five quarterly reports. 

Chewy is a small enough product that undefined risk positions can be executed with a relatively smaller amount of buying power needed compared to more expensive products. Short puts are an option if you want to take on the risk associated with naked short puts. 18-delta short strangles set up well as well. Defined risk positions will need to be closer to the money to create a decent credit to buying power used ratio. 

4. DocuSign

DocuSign (DOCU) is a leader in electronic agreements and signature technology, facilitating secure digital transactions. The company's software is widely used for contract management and electronic document signing, streamlining business processes across various industries. DocuSign's solutions are integral to the digital transformation of legal, sales, and administrative functions. 

DocuSign is currently trading at $42.20, down 25.23% from its opening price of 2023 at $56.44. The current IVR on the tastytrade platform is 40.3. The IV in December's contract is 77.3 and January's contract is 53.3. DOCU has not reported positive net income in any of its last five quarterly reports. 

The company is a small enough product that undefined risk positions can be executed with a relatively smaller amount of buying power needed compared to more expensive products. 18-delta short strangles set up well. Short puts are an option if you want to take on the risk associated with naked short puts. 35-delta short directional spreads also set up well with a decent credit to buying power used ratio. 

5. Adobe

Adobe (ADBE) is a multinational software company, renowned for its creative and multimedia software products like Photoshop, Illustrator, and the Adobe Creative Cloud suite. The company also offers digital marketing tools and PDF software. Adobe's innovations in digital media and digital marketing software have made it a key player in the creative industry. 

Adobe is currently trading at $622.43, up 82.97% from its opening price of 2023 at $340.16. The current IVR on the tastytrade platform is 21.2. The IV in December's contract is 38.3 and January's contract is 31.7. Adobe reported positive net income in its last five quarterly reports. 

Adobe is an expensive stock and requires a significant amount of buying power to establish undefined risk positions. For that reason, I suggest most traders use defined risk positions. One standard deviation, five-dollar-wide iron condors set up well and can be made narrower to take on more risk. Directional spreads also set up well and more deltas can be added to take on more risk. 

6. Costco Wholesale

Costco Wholesale (COST) is a global retail giant known for its membership-only warehouse clubs offering a wide variety of products at discount prices. The company operates on a bulk-sale model, catering to both individual consumers and businesses.

Costco is currently trading at $597.26, up 30.41% from its opening price of 2023 at $458. The current IVR on the tastytrade platform is 20.4. The IV in December's contract is 22.7 and January's contract is 18.9. Costco reported positive net income in its last five quarterly reports. 

COST is an expensive stock and requires a significant amount of buying power to establish undefined risk positions. For that reason, I suggest most traders use defined risk positions. 22-delta, five-dollar-wide iron condors set up well and can be made narrower to take on more risk. Directional spreads are also set up well and more deltas can be added to take on more risk. 

7. Accenture

Accenture (ACN) is a leading global professional services company. Accenture is known for its expertise in IT services, business process outsourcing, and consulting services across various industries. Accenture's focus on innovation and digital transformation has made it a key partner for businesses worldwide. 

Accenture is currently trading at $332.93, up 23.67% from its opening price of 2023 at $269.20. The current IVR on the tastytrade platform is 14.6. The IV in December's contract is 17.5 and January's contract is 22.1. Accenture reported positive net income in its last five quarterly reports. 

ACN is an expensive stock and requires a significant amount of buying power to establish undefined risk positions. For that reason, I suggest most traders use defined risk positions. Also, earnings trades for ACN in December will want to use January’s contracts.  

22-delta, five-dollar-wide iron condors set up well and can be made narrower to take on more risk. Directional spreads also set up well and more deltas can be added to take on more risk. However, you’ll likely want to wait for the earnings date to be closer before executing an earnings trade. 

8. FedEx

FedEx (FDX) is a multinational delivery services company, known for its overnight shipping services. The company offers a wide range of logistics, e-commerce, and business services.

FedEx is currently trading at $252.91, up 44.54% from its opening price of 2023 at $174.97. The current IVR on the tastytrade platform is 31.9. The IV in December's contract is 22.7 and January's contract is 29. FDX reported positive net income in its last five quarterly reports. 

FedEx is an expensive stock and requires a significant amount of buying power to establish undefined risk positions. For that reason, I suggest most traders use defined risk positions. Also, earnings trades for FDX in December will want to use January’s contracts.  

One standard deviation, five-dollar-wide iron condors set up well and can be made narrower to take on more risk. Directional spreads also set up well and more deltas can be added to take on more risk. However, you’ll likely want to wait for the earnings date to be closer before executing an earnings trade. 

9. Micron Technology

Micron Technology (MU) is a global leader in the semiconductor industry, specializing in memory and storage solutions. The company's products are critical components in advanced computing, consumer electronics, and mobile devices. Micron's innovations in memory technologies have been pivotal in the advancement of the tech industry. 

MU is currently trading at $77.63, up 54.12% from its opening price of 2023 at $50.37. The current IVR on the tastytrade platform is 17.9. The IV in December's contract is 33 and January's contract is 35.6. MU reported positive net income in four of its last five quarterly reports. 

MU is a small enough product that undefined risk positions can be executed with a relatively smaller amount of buying power needed compared to more expensive products. Also, earnings trades for MU in December will want to use January’s contracts. 18-delta short strangles set up well.  

Short puts are an option if you want to take on the risk associated with naked short puts. 35-delta short directional spreads also set up well with a decent credit to buying power used ratio. However, you’ll likely want to wait for the earnings date to be closer before executing an earnings trade. However, you’ll likely want to wait for the earnings date to be closer before executing an earnings trade. 

10. Nike

Nike (NKE) is a world-renowned brand in athletic footwear, apparel, equipment, and accessories.

Nike is currently trading at $107.91, down 8.98% from its opening price of 2023 at $118.55. The current IVR on the tastytrade platform is 28.5. The IV in December's contract is 21.8 and January's contract is 29.7. NKE reported positive net income in its last five quarterly reports. 

Nike, with a stock price just over $100, is an opportunity for medium-sized accounts to establish undefined risk positions that require a bit more buying power and offer a larger premium to collect as a result. One standard deviation short strangles set up well. However, you’ll likely want to wait for the earnings date to be closer before executing an earnings trade. 

Ryan Sullivanis an active options and forex trader and programming producer for the tastylive network.

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