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3 Top Stock Charts to Buy for 2022

InvestorPlace ·  Dec 31, 2021 12:22

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Equities are topping off a banner year this week. Barring any late-day shenanigans, the S&P 500 should end 2021 with an annual gain of 27%. With such a strong backdrop, my watchlist is littered with good-looking charts to buy.

Notably, many are poised for further gains as we begin a new year. I consider the three below all top stock charts to buy for 2022.

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To increase the odds of success, I'm casting a wide net. Rather than focus on a single sector, today's list includes an automobile company that's cashing in on the electric vehicle movement, a technology heavyweight, and a volatile growth stock that's due for a resurgence. The first two are ending the year on a high note, inches from new 52-week highs. The third is a wild card that looks to be bottoming.

  • Ford (NYSE:F)
  • Microsoft (NASDAQ:MSFT)
  • Affirm (NASDAQ:AFRM)

We'll take a closer look at each price chart and map out which price levels need to be broken before pulling the trigger. Then, I'll build out an intelligent options trade to capitalize on their next leg higher.

3 Top Stock Charts to Buy for 2022: Ford (F)

Source: The thinkorswim® platform from TD Ameritrade

2021 has been a transformative year for Ford. Its share price is up 136%, carrying prices to levels not seen in 20 years. Investors have cheered the company's improving earnings numbers and its continued expansion into electric vehicles. Ford reinstated its quarterly dividend after first halting the payout last year when the global pandemic torpedoed the economy.

Ford shares are rallying nicely this morning, up 1.5%. That places them within striking distance of this year's high and at the top end of the recent trading range. In addition, the 20-day, 50-day, and 200-day moving averages are all rising to confirm buyers dominate the trend across all time frames.

This sets up a clean breakout trade heading into 2022. Bull call spreads offer limited risk and a low-cost way to play. I will use March options to provide exposure through the first quarter.

The Trade: Buy the March $20/$25 call vertical for $1.60.

Microsoft (MSFT)

Source: The thinkorswim® platform from TD Ameritrade

In a way, 2021 was the year of the mega-cap. The broad market indexes exhibited such little volatility and remained pinned near record highs throughout the year because the largest holdings, like Microsoft, refused to go down. They acted as safe havens even as growth stocks, SPACs, small-caps, and other areas suffered significant drawdowns.

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Even now, with the S&P 500 and Nasdaq ending on a high note, many beaten-down areas remain that way. If you want to be a contrarian and bet MSFT stock receives its comeuppance next year, go ahead. For now, the chart looks healthy, and I see a potential breakout trade looming. The past two months saw a sideways base form, with a possible trigger over $345.

If prices rise above it, buy call spreads.

The Trade: Buy the March $345/$365 bull call for around $7.50.

3 Top Stock Charts to Buy for 2022: Affirm (AFRM)

Source: The thinkorswim® platform from TD Ameritrade

The third submission for today's top stock charts to buy is a wild card. Unlike its predecessors, Affirm finds itself searching for a bottom at the lower end of its price chart. It's a highly volatile stock that fell 50% since last month's peak. Previous to that, shares rose 280% in about six months. So if you can catch it when shares are in favor, significant gains await.

Over the past two weeks, the downtrend's momentum slowed, and support is forming at the 200-day moving average. If prices can climb above the 20-day moving average, it would further confirm that a bottom is in. At that point, I think a quick trip to $130 is in the cards. To be clear, wait for a rise above $109 before pulling the trigger.

The sky-high volatility makes spread trades the best strategy to use.

The Trade: Buy the February $110/$130 bull call spread for around $6.

On the date of publication, Tyler Craig was LONG F. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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