Two High-Momentum Stocks to Buy and One to Sell After S&P 500's Impressive Month, According to Traders

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The S&P 500's impressive run this month has pushed some stocks well above their longer-term trend.

L Brands, Gap, Align Technology, Etsy and Deere are among the names where their 50-day moving average has far exceeded their 200-day average. In L Brands' case, for example, its 50-day trades 50% above its 200-day.

Danielle Shay, director of options at Simpler Trading, is betting on two of those stocks for more gains.

"I love to follow the momentum to the upside. I'm definitely a bullish momentum trader and especially Etsy and John Deere," Shay told CNBC's "Trading Nation" on Wednesday. "They provide really good opportunities in the options market for selling put credit spreads, buying long calls, and just owning the stock as well."

Not all of those stocks are so well regarded, though. John Petrides, portfolio manager at Tocqueville Asset Management, urges caution on Gap.

"Gap is facing two structural issues. One, as we all know, Covid has been the great accelerator to e-commerce. And that leads to … less foot traffic in the store going forward. And also, they announced the turnaround plan back in October where they're spending a lot of money or will be spending a lot of money on beefing up their marketing efforts to pick up market share so there's still a turnaround story," Petrides said during the same "Trading Nation" segment.

Shay agrees that Gap is in a more precarious position than the other stocks.

"This one is the weaker of the names in this group and currently the way that it's sitting on the 50-period simple. … If that level breaks, we could see a pretty decent decline there so out of these names, that's really the only one that I would look for a potential breakdown," said Shay.

Gap closed Wednesday at $20.92, just barely above its 50-day moving average at $20.58.

Disclosure: Shay holds DE and ETSY.


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