With earnings season under way, few sectors of the market are more splintered than technology. Since the beginning of earnings season, the Technology Select Sector SPDR (NYSE:XLK) has declined by 2% vs. the S&P 500’s gain of 1%. A more stark way of seeing the divergence in the technology sector is the number of companies posting new one-month highs and lows within the sector. As of Thursday’s close, 55% of the XLK component companies were sagging to new one-month lows with only 10% breaking to new highs for the same period.
If you haven’t sold already, these three companies are among the industry darlings that look ready to skid lower, fast:
Over the last year Apple (NASDAQ:AAPL) has swelled to become the largest of the large-cap stocks. There are a few problems with that, though — the biggest being that everyone seems to own the stock! AAPL has become the poster child for the “crowded trade.” Just about every fund manager out there owns the stock, and now that the technical trend is reversing, these investors will be increasingly nervous to risk losing their profits. Earlier this week, AAPL’s 20-day moving average moved below its 50-day, suggesting that the trend is no longer investors’ friend. If you haven’t locked in profits in AAPL shares, do so now before the stock breaks toward our near-term target of $560-$580.
This tech giant was a leader through the first half of the year as investors warmed up to the shares. And Broadcom (NASDAQ:BRCM) is now among the most recommended stocks on the Street, with 83% of the recommendations in the “Buy” category. Technically, BRCM shares are embarking on a familiar trend — it is starting a trend of lower lows. The last time that we saw this trend in BRCM was when it peaked in April … before falling 25% from $39 to $30. Watch out for BRCM shares to throw back to their July lows of $29.
Like AAPL and BRCM, the Street loves Qualcomm (NASDAQ:QCOM) shares, despite the fact that the shares are up less than 10% for the year, a third less than the S&P 500 gains. QCOM won’t announce earnings until the first week of November, but expect investors to start selling now based on other tech earnings results, compounded by the fact that QCOM missed its earnings mark last quarter. The trip to $54 should be a fairly easy ride for QCOM, meaning that locking in today’s prices could avoid a 10% decline.