Earnings season has come and gone. And while a few stragglers have yet to report, the lion’s share of Wall Street’s darlings have now stepped up to the plate. Some have struck out, others have put the ball in play, and a select few have hit crowd-pleasing home runs. The technology sector has seen a variety of outcomes, but one theme has dominated — profit-taking. Indeed, many tech stocks have retreated immediately following their earnings bursts.
On one hand, we could say it’s a bit unsettling that these market leaders can’t hold onto their post-earnings gains. It suggests a change in market character where traders have begun using good news as an excuse to sell instead of buy.
On the other hand, it may just be a matter of the season. The summertime snooze is upon us, which encourages lackluster action and failed breakouts.
Either way, the pullback seizing tech stocks of late strikes me as an opportunity — a chance to initiate bullish plays at more attractive prices.
Check out these three tech stocks with buy-worthy dips.
3 Tech Stocks to Trade Long on the Dip: Apple (AAPL)
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We begin with Apple Inc. (NASDAQ:AAPL). The tech titan’s earnings bonanza was enough to spur its share price to record highs. But rather than getting bought, the earnings gap was initially sold as eager beavers rang the register. That has formed a two-day pullback which looks benign enough to be a buy.
While I’d like to see another down day or two before pulling the trigger, I’m not sure if the market will oblige. Either way, I think AAPL stock should be able to remain above $145 for the next month.
The Trade: To capitalize, sell the Sep $145/$140 bull put spread for 55 cents or better. The reward is limited to 55 cents and the risk is limited to $4.45.
3 Tech Stocks to Trade Long on the Dip: Netflix (NFLX)
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Next up is Netflix, Inc. (NASDAQ:NFLX), which arguably had the best earnings response of today’s trio. NFLX stock popped another $15 even after its strong price gap.
The willingness of buyers to pile in following a strong overnight jump leads me to believe dips will continue to be gobbled up. And what do you know? We have a nice little pullback right now.
Two potential support levels loom close. First there’s the unfilled gap at $175. And then there’s the rising 20-day moving average, which also rests near $175. I suspect both catalysts will attract bulls if Netflix falls any further. But even if they don’t, I’m still willing to bet NFLX is above $165 at September expiration.
The Trade: Sell the Sep $165/$160 bull put spread for 70 cents. The max reward is 70 cents and the max risk is $4.30.
3 Tech Stocks to Trade Long on the Dip: Amazon (AMZN)
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Finally we have Amazon.com, Inc. (NASDAQ:AMZN). If NFLX was the strongest of the bunch, then AMZN is undoubtedly the weakest. Its post-earnings drop carried shares down to the 50-day moving average.
We’ve seen quite the tug-of-war here over the past four trading sessions. Right now, bears seem to be winning, but the jury is still out.
Continued weakness down to the $960 level would actually setup up a better buy-the-dip play, but I wanted to highlight the stock just in case buyers step in quicker.
The Trade: When and if we see a bona fide bullish candlestick form, consider selling the Sep $930/$920 bull put for around $1.70. The max reward is limited to the $1.70 and the max risk is limited to $8.30.
As of this writing, Tyler Craig held neutral option positions in NFLX. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
