4 Tech Stocks to Short Before Trump Takes Office

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It’s been a war of words thus far, but an escalation could turn into a bonafide tech wreck for the most influential of tech stocks. It’s a slippery slope, indeed, yet investors can profit handsomely using bearish options spreads.

4 Tech Stocks to Short Before Trump Takes Office

President-elect Donald Trump has made it known that he plans on implementing policies that could take the bite out of the “Fang” stocks. This could spell trouble for some of the greatest game-changing tech outfits in our lifetimes and their shareholders.

It’s no secret the incoming President has issues with Silicon Valley. But these Big Tech stocks in particular are wearing targets on their backs. That should make each stronger short opportunities if Trump is true to his word.

Let’s now examine some of the specific risks off and on the price charts of the following four tech stocks, as well as discuss bearish limited-risk strategies that look well-priced for the occasion.

Tech Stocks to Short: Apple (AAPL)

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Source: Charts by TradingView

But AAPL stock may not be as cheap as you’ve been led to believe as one well-respected investor recently laid out. Additionally, Trump’s not a fan of Apple.

Trump was a vocal critic of Apple’s decision to refuse federal investigators access to private cellphone information following the San Bernardino attack earlier this year, going as far as calling for a boycott of Apple products. And that rhetoric about making America great again? Well, protectionist policies aimed at China could decimate Apple’s manufacturing as the new administration tries to reclaim jobs lost to markets overseas or poses tariffs on imports.

The AAPL stock chart is also of concern. Following a successful test of its 50- and 200-day simple moving averages, shares of Apple have rallied into zone resistance from roughly $112.25 to $113.50. The resistance area holds a key price pivot, AAPL’s recently broken, up-channel support line, as well as the 50-day simple moving average. Our technical point of view is that shares of Apple will falter and lead to a deeper decline in shares, between $98 and $102, before all is said and done.

Checking AAPL’s options and shares near $111.80, the Dec 30 $108/$105/$102 bearish put butterfly is attractive. Priced for 30 cents, the limited risk position offers a nice expiration profit range between $102.30 and $107.70 and a maximum return of $2.70 at $105 in a perfect or Trump-approved world.

Tech Stocks to Short: Facebook (FB)

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Source: Charts by TradingView

If Trump has his way, new net neutrality, encryption and immigration policies could impact Facebook’s future prospects in a negative way.

The irony with FB stock as a targeted short is that Facebook CEO Mark Zuckerberg publicly assured that Trump’s more questionable talking points during the campaign weren’t censored, despite strong internal resistance within the company. In fact, Facebook may have even helped Trump win due to favorable fake news reports filtering onto the social media site.

The potential hostility for Facebook hasn’t shown up altogether on the provided weekly view. The longer-term view shows a couple rough spots over the past couple years, but a classic uptrend is still intact following some recent, very loose testing of 200-day simple moving average support. That’s the good news.

The flipside of FB’s apparent sturdy behavior is all growth stocks eventually become their own worst enemy. With Trump’s disdain in tow, an all-too-normal 30% corrective move in the coming months appears to have extra catalysts for entering the Facebook price chart. In that spirit, FB stock could spiral down to a range of $90 to $100 during 2017. Reviewing Facebook’s options, I like the March $115/$105 bear put spread for $2.65 for positioning into the anticipated price decline.

The intermediate-term vertical requires a price decline of just under 7% in FB stock to breakeven at expiration. Bottom line, Facebook could be well on its way to delivering its max return of $7.35, below $105, with plenty of downside left for future bearish trades.

Tech Stocks to Short: Amazon (AMZN)

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Source: Charts by TradingView

Aside from the newspaper being a regular anti-Trump critic, the President-elect contends that the purchase has been nothing more than a tax dodge. No matter if one sees the irony in all of this—shares of Amazon are obviously under additional pressure from Trump.

Plans by the incoming administration to cut down on favorable immigration reform for high-skilled, foreign workers could prove a burden for a company like Amazon. Beyond that, a sky-high price multiple of around 175 for AMZN stock, not to mention the poor reaction to its recent earnings miss, only add to the potentially bearish backdrop.

Technically speaking, I anticipate the lows of this month’s corrective test in AMZN will be challenged again in a high-level, double-bottom pattern. The area is key for AMZN stock bulls as it holds price support from its prior highs, 200-day simple moving average and 38% retracement. Currently, shares of Amazon have rallied handily from its bottom into a short-term overbought condition. AMZN stock is also facing resistance from the 50-day simple moving average. The institutional support line had defined the trend the past six months and with a bearish Doji signal last week — a move lower appears ready.

Reviewing AMZN’s options, the Jan $760/$745 bear put spread is attractive. Priced for around $5 with shares of AMZN at $780.40, this vertical requires a decline of less than 5% to maximize its return of 200%, or $10 profit at expiration. This bear spread is situated well above the recent low of $710. The placement is a nice feature. However, in the event of a quick retest, this trader should consider taking lesser, more secure profits, or adjusting into a low- or no-cost position.

Tech Stocks to Short: Netflix (NFLX)

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Source: Charts by TradingView

Another challenge for NFLX stock considering a potentially more difficult operating environment is the company’s lofty price multiple in excess of 300.

With earnings of just 7 cents in its most recent quarter, increasingly heavy spending required to ward off competitors and still uncertain international success vital to its future, NFLX has its share of headwinds.

On the price chart, NFLX has actually put together a very large corrective base over the past year. That’s bullish. Additionally, with a recent test of the April pivot high confirming support, bulls can’t be entirely faulted for seeing upside in shares of Netflix. Considering the company’s more questionable prospects off the chart, however, a price break in NFLX below recent lows and the 50-day simple moving average support could result in a gap fill and test of the 200-day simple moving average. Of the two, we’re inclined to vote in favor of this outcome.

For traders also favoring lower prices in NFLX, a modified Weeklys Dec 23 $112/$105 /$100 bearish put butterfly is attractive. For roughly $1, the trader essentially is positioned to breakeven at $111 and not far below current support that’s expected to fail and lead to even lower prices. The max reward of $6 sits inside the gap area and would require shares of Netflix to pin at $105 on expiration. That’s nice, but also a bit unlikely.

Unlike a regular butterfly, the bearish trader is guaranteed a profit of at least $1 if NFLX were to collapse below the spread due to the variation in width of the two embedded vertical spreads.

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives 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.

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 and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2016/11/tech-stocks-to-short-trump-aapl-fb-amzn-nflx/.

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