The holiday spirit that lifted stocks into the Christmas holiday — the Dow Jones Industrial Average rose for seven days straight for a gain of more than 1,000 points — faded a little on Monday with the index closing down 0.1%.
The market is deep into short-term oversold territory thanks to investor sentiment a little above “foaming at the mouth” given seasonal strength, the lift from the recent Federal Reserve meeting statement and an apparent inability of any catalyst to put fear into the hearts of traders.
But that masks evidence of weakness below the surface.
The market internals data shows that the rebound rally of the last few weeks was more feeble and hollow than it appeared on the surface. You can see this in the percentage of stocks in the New York Stock Exchange above their 50-day moving average: Despite the fact the Dow is just off of its record high, only 60% of NYSE stocks are in uptrends versus nearly 75% back in late November and nearly 85% back in July. At the sector level, this weakness is manifesting as some vulnerable-looking charts for a handful of popular tech stocks.
Here are five tech stocks to avoid if you’re long … or to consider as short or put option plays if you’re feeling frisky.
Tech Stocks to Avoid, Sell or Short: Intel Corporation (INTC)
Click to Enlarge Intel Corporation (INTC) is contending with double-tip resistance near $38 set earlier this month — mirroring a similar pattern developing in tech stocks across the semiconductor space. On a relative strength basis, chipmakers are weakening against the S&P 500 on a scale not seen since early October.
In response, I’ve recommended the Jan $37 puts to my Edge Pro subscribers.
Tech Stocks to Avoid, Sell or Short: Twitter Inc (TWTR)
Click to Enlarge Twitter Inc (TWTR) never really participated in the rebound off of the mid-December lows, and is at risk of violating support at $35 — putting the May lows below $30 in play.
I’ve recommended the Jan $36 puts to my Edge Pro subscribers.
Tech Stocks to Avoid, Sell or Short: International Business Machines Corp. (IBM)
Click to Enlarge After reporting disappointing earnings results back in October, International Business Machines Corp. (IBM) hasn’t been able to get off the mat and looks ready for another excursion below its multimonth support line at $160.
A test of the mid-December lows appears to be in the cards.
Tech Stocks to Avoid, Sell or Short: Microsoft Corporation (MSFT)
Click to Enlarge Microsoft Corporation (MSFT) is once again testing support at its 50-day moving average, but looks vulnerable to a downside break to its 200-day moving average — a level it hasn’t touched in nearly two years.
Tech Stocks to Avoid, Sell or Short: Google Inc (GOOGL)
Click to Enlarge Google Inc (GOOGL) has been in a persistent downtrend since peaking back in February and testing that high again in July and September. Over the past week, GOOGL challenged its 50-day moving average for the first time since early October, but it doesn’t look like it’ll be able to push through before the broad market resolves its short-term oversold condition.
The broad market weakness that should result likely will push GOOGL shares back toward the $500 level.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
