It’s been somewhat of a rocky month for tech stocks. After hitting a new 52-week high on Mar. 2, the Technology SPDR (ETF) (NYSEARCA:XLK) then promptly turned around and fell 1.3%, about twice the decline of the broad market.
Looking at individual charts, there are several that suggest further downside for those particular stocks.
Here are four such tech stocks for which the Profit Scanner powered by Recognia has identified longer-term bearish signals.
Let’s take a look:
Netflix, Inc. (NASDAQ:NFLX)
Netflix, Inc. (NASDAQ:NFLX) has been hit particularly hard, down more than 10% since Mar. 2, and on Mar. 16 NFLX stock suffered a downgrade by analysts at Evercore ISI. That same day, the Profit Scanner found two intermediate-term bearish signals on NFLX’s chart.
One was a Head and Shoulders Top. This chart pattern is considered to be among the most reliable and is also extremely popular in technical analysis — but, for those who aren’t as familiar with it, here’s a brief description.
The Head and Shoulders Top occurs after a significant uptrend, and consists of three successive rallies: the highest being in the middle (the “head”), with two others on either side at about the same level (the “shoulders”).
The below chart of NFLX is a clear example of the pattern:
Volume is a key factor in this particular pattern. Specifically, volume is highest at the first two highs, then tapers off through the third high (the right shoulder). Then volume surges as the stock drops through the “neckline” at the bottom of the head. That’s just what happened on Mar. 16, when NFLX fell 3.7% on 3.8 million shares traded — more than double its average trading volume.
Based on this pattern, Profit Scanner’s target is $376 – $386, or a 9% – 11% drop, within the next 37 trading days.
In the Netflix chart above, you can also see the other bearish signal: a break below the 50-day moving average. Every stock has its bad days, and moving averages essentially help you evaluate whether the weakness is likely to continue. This particular bearish Moving Average Crossover reinforces Profit Scanner’s expectation for further downside for NFLX in the intermediate term.
Energous Corp (NASDAQ:WATT)
Energous Corp (NASDAQ:WATT), which develops wire-free battery charging technology, has also had a rough time of it. WATT shares are down by about 12% after a huge gap up on March 10, and there have been a series of bearish signals since then, including crosses below the 200-day, the 50-day and the 21-day moving averages.
WATT’s latest bearish signal was on Mar. 17, when the Profit Scanner identified a bearish Symmetrical Continuation Triangle on its chart.
This pattern is made up of two converging trendlines as the stock makes lower highs and higher lows. Before the triangle reaches its apex, the share price then breaks down below the lower trendline, as shown in the WATT chart below:
Now that the bearish Symmetrical Continuation Triangle has been confirmed, Profit Scanner expects the prior downtrend to continue, and for WATT shares to drop to the $4.30 – $5.30 level — or about a 50% decline from current levels — over the next 60 trading days.
WATT also suffered a shorter-term bearish signal on Mar. 16, when the MACD indicator crossed below its average. All in all, the technical picture is clear: bulls should avoid Energous, and bears should look to profit on the downside.
Himax Technologies, Inc. (ADR) (NASDAQ:HIMX)
Profit Scanner has a similarly bleak outlook for Taiwanese semiconductor stock Himax Technologies, Inc. (ADR) (NASDAQ:HIMX). On Mar. 17, a bearish Symmetrical Continuation Triangle was confirmed; in HIMX’s case, the pattern carries a downside target of $3.80 – $4.40. That would be a 35% – 44% drop and is expected within the next 84 trading days.
On Mar. 18 came another bearish signal, via the Short-Term “Know Sure Thing” (KST). This oscillator basically evaluates a stock’s momentum; a bullish event occurs when the KST rises above its moving average, and a bearish one occurs when it falls below its moving average.
You can see in the chart below HIMX just did so, about a month after the last such crossover:
The day before, HIMX’s MACD and Momentum indicators also turned bearish, following a cross below the 200-day moving average on Mar. 16. In other words, HIMX’s chart is looking very broken and ripe for the picking by opportunistic short traders.
Super Micro Computer, Inc. (NASDAQ:SMCI)
And finally, Super Micro Computer, Inc. (NASDAQ:SMCI), a server and systems company, is also flashing a variety of bearish signals going back about a month. Mar. 13 was a particularly bad day for SMCI shares, with five bearish signals in total.
SMCI stock broke below its 50-day moving average and also completed a Head and Shoulders Top, the latter of which carries 11% – 14% downside in the next 24 trading days. The target range is $31.50 – $32.40.
The other bearish events for SMCI on Mar. 13 were mostly shorter-term signals, and came from the Slow Stochastic, Williams %R and the MACD indicators.
Like NFLX, WATT and HIMX, SMCI is clearly bad news for tech bulls…but could present significant profit opportunities to bears.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.
