Think tech stocks are doomed? Nobody would blame you if you did.
Social media stocks have imploded, with Twitter (TWTR) and LinkedIn (LNKD) down 50% and 33% respectively. Internet stocks Yahoo (YHOO) and Baidu (BIDU) are down about 15%. 3D printers like Stratasys (SSYS) is down 30%, and 3D Systems (DDD) has plunged almost 50%.
But as the old saying goes, past performance is not a prediction of future returns.
Click to EnlargeCheck out this trading screen from Bespoke Investment Group that spans the 30 largest Internet stocks on Wall Street. The dots on the chart represents where tech stocks are currently trading, and the tail represents where it was trading one week ago. The black vertical “N” line represents each tech stock’s 50-day moving average, and moves into the green or red zones are considered oversold or overbought.
If the chart about tech stocks being oversold doesn’t’ speak for itself, here’s an explainer from Bespoke:
As shown, 24 of the 30 largest Internet stocks are back to oversold territory after experiencing a big drop over the last two trading days. Groupon (GRPN) and AOL (AOL) are at the most oversold levels after suffering big losses on earnings yesterday. Just 3 of the 30 stocks are currently above their 50-days — EQIX, OTEX and Z. Across the board, names like Google (GOOGL), Facebook (FB), Amazon.com (AMZN), Netflix (NFLX), Yahoo (YHOO) and Pandora (P) are oversold. While this group is in a clear downtrend, they still experience bounces, and when they get to extreme oversold territory, they’re usually primed for a short-term bounce.
So before you write off tech stocks as dead money, consider that just as what goes up must come down … some stocks that go down can quickly bounce back.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.