Was Thursday’s slight turn the end of a bear market rally or simply the last touch on an oversold relief reaction following a good bit of panicked selling?
If it’s tech stocks you’re interested in, as a universe, it could be either.
At the same time, it’s worth considering there’s always a bull market somewhere or possibly the beginnings of one, such as with three well-known but highly disparaged tech stocks.
Let’s explore these three large-cap tech stocks, whose wayward and leading bearish behavior over the past year or longer may finally be turning the corner.
That means they may be ready to deliver some shareholder value after a long dry spell.
Bullish Trend in Tech Stocks: Twitter Inc (TWTR)
Twitter Inc (TWTR) stock is off to a great start from a contrarian standpoint, if this is the beginning of a fresh bull run.
Why is that? One big reason is during 2015, TWTR shares were among the most heavily despised in large-cap tech stocks.
While other tech stocks were holding their own or even hitting new all-time-highs in 2015, Twitter was simply punishing for bulls, showing more than a few false bottoms on its way to a yearly decline of more than 35% and a more massive 70% drop from its December 2013 all-time high by the close of 2015.
After a continued pounding to all-time-lows in TWTR during the first few weeks of 2016, this tech stock is setting itself up for a contrarian, against-the-grain, market-bucking, bullish trend.
What’s changed for Twitter? Aside from Thursday’s promising gain of about 5% in the face of broader market weakness, TWTR stock did manage a successful breakout from a downtrend line.
Truthfully though, as our chart illustrates, there are still other resistance lines and congestion areas which might take some work to move through before a new uptrend in this tech stock is fully developed.
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Additionally, contrarians should love that Thursday’s gains for this tech stock marked a fourth session of upside off TWTR stock’s purportedly bearish earnings focused on disappointing monthly average users, or MAUs — or so they told us!
From this contrarian vantage point, the reaction last week in TWTR looks like a last gasp effort from bears overstaying their welcome in this tech stock!
For bullish investors willing to hop on board a still-forming bullish trend, selling a cash-covered weekly April 1 $17 put looks attractive. Priced around $1 with TWTR near $18.40, the put offers traders a way to collect over 5% in a handful of weeks.
Conversely, it also effectively allows the trader to buy shares of this tech stock on a pullback of 13% from current levels and where the smart money recently purchased this down, but not out, tech stock.
Bullish Trend in Tech Stocks: Garmin Ltd (GRMN)
Navigational tools and wearables outfit Garmin Ltd (GRMN) is looking clearly like it wants a change of direction to all points north on the GRMN stock chart!
Garmin has not been kind to bulls wearing this tech stock. Since mid-2014, GRMN stock lost over 30%, and from its highs near $126 back in 2007, shares are off a menacing 68%.
But the days of bearish behavior may be a thing of the past. Over the past six months, this tech stock has put in a double-bottom pattern. And with Wednesday’s price action in GRMN stock, bulls could have a game-changer in their hands.
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GRMN traders reacted bullishly to stronger-than-expected profits and maybe bowing to the fact that this tech stock is not just a one-trick product pony, but a diverse and nimble operator.
Thursday’s action in GRMN wasn’t too shabby either for this tech stock. Early trading saw sizable profit-taking, but shares of GRMN recouped most of the loss to settle off by -0.78% and maintain what now appears to be support on the price chart.
For bullish-minded traders, I’d recommend wearing the GRMN April $40/$42.5 bull call spread as one way to capitalize on a bullish trend change underway at this tech stock.
The GRMN spread is fetching $1.10 and makes for a smarter position than buying the tech stock, as risk is limited to the debit paid, reduces unwanted Greeks risks and maintains a nice risk-to-reward profile.
Bullish Trend in Tech Stocks: Qualcomm, Inc. (QCOM)
Much like Garmin, since mid-2014, bulls in Qualcomm, Inc. (QCOM) have weathered declining shareholder value of 50% at recent lows set last week. No doubt, Qualcomm has been a very weak name in the universe of large-cap tech stocks.
The good news at this point is that as a contrarian play, the QCOM monthly chart looks very supportive of a major low.
The chart of this tech stock shows channel, Fibonacci and long-term moving average support, worthy of a meaningful bottom. What’s more, QCOM stock is also well on its way to forming a bullish engulfing candlestick on the monthly chart.
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Most recent, Qualcomm’s newest Snapdragon processor has been confirmed as being in LG’s soon-to-be-released flagship smartphone. What’s more, the tech stock is busy trying to re-energize earnings growth with moves into new and less saturated markets like drones and the Internet of Things.
Qualcomm also has a clean balance sheet, trades at a below-market multiple and sports a dividend of more than 4%. As much, there’s plenty of support for this tech stock off the QCOM chart as well.
For positioning, if QCOM stock can confirm its monthly reversal and trade above $50.60 or 3% above Thursday’s close, the April $50/$52.5 bull call spread should be worth around $1.15 — and offer bullish traders a good balance of opportunity versus risk.
Investment accounts under Christopher Tyler’s management currently own TWTR stock and its derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT
