Stocks are under pressure again on Monday with important areas like biotech, big tech, and junk bonds dropping hard.
The catalyst is the ongoing fallout from last week’s speech by Federal Reserve chairman Janet Yellen in which she reinforced the case for a rate hike before the end of the year, something that hasn’t happened since 2006.
This attitude was reflected by New York Fed President William Dudley, who told The Wall Street Journal that rates will go up this year.
Also contributing was another disappointing data point out of China: Industrial profits fell 8.8% year-over-year for the biggest monthly decline since 2011. That news is hitting commodities once more with crude oil dipping back below the $45-per-barrel level.
But the weakness in a number of ultra-popular tech stocks is what’s really catching my eye today, setting up new trading opportunities on the short side.
Tech Stocks to Short: Apple (AAPL)
Apple (AAPL) shares are breaking down and out of a two-month bear flag pattern after disclosing total sales of the iPhone 6s and iPhone 6s Plus models at 13 million units to date. That’s a record for an opening weekend, but the result is skewed by the inclusion of China for the first time. An additional 40 countries will see the phones go on sale beginning October 9 with 130 countries on the list by the end of the year.
Obviously, the result missed the Street’s whisper number, and disappointment is setting in as investors get the nagging feeling that Apple’s innovation cycle is slowing badly. Edge Pro subscribers are in the green on their October $113 AAPL puts that were recommended late last week.
Tech Stocks to Short: Amazon (AMZN)
Amazon (AMZN) is dropping out of a three-month topping pattern as investors lose interest in the stock that surged this summer on a surprise report of profitability last quarter. The company’s ill-fated foray into smartphones and reports its slowing its development of new hardware devices cuts out a big source of potential revenue growth.
Watch for a return to the April-July trading range, which would be worth a 15% drop from here.
Tech Stocks to Short: Facebook (FB)
Facebook (FB) shares are dropping out of a topping pattern going back to July as new growth drivers like its Oculus VR headset and reports of a “dislike” button under testing seem incremental or ancillary at best.
While the virtual reality/augmented reality technology is cool, companies like Microsoft and Sony are arguably better placed to capitalize on the trend at least initially — since it will likely be relegated to hardcore gamers, not casual internet denizens posting baby pictures and blood moon photos.
Tech Stocks to Short: GoPro (GPRO)
GoPro (GPRO) shares have been hammered after HD/4K video chip maker Ambarella (AMBA) reported quarterly results that disappointed lofty expectations. Analysts at Oppenheimer told clients a few weeks ago that the company’s core products are seeing slowing growth in a shrinking video capture marketplace.
The breakdown takes GPRO shares under their September consolidation range returning prices to levels not seen since its IPO week in June 2014.
Tech Stocks to Short: Tesla Motors (TSLA)
Tesla Motors (TSLA) shares are breaking down through two-month uptrend support after hitting resistance from its June-August topping range just one day ahead of the launch of its Model X SUV. The stock has been under some pressure following reports AAPL had given the green light to its electric vehicle project for a 2019 release.
While positive on the stock, Stifel analysts note that the company’s desire to increase production in the most cost effective way, cognizant of maintaining quality standards, may lead to a slower ramp up than many investors would like to see — possibility fueling short-term disappointment.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
