Sell or Short the ‘Trinity of Tech’ NOW — AAPL, FB, GOOGL


We’re halfway through May, and it appears the market has up and forgotten the whole “Sell in May and go away” thing. Which is good — we’re not a big fan of blindly following this rule, as studies have shown that you’re leaving a lot of money on the table by sitting in cash until October.

Sell or Short the 'Trinity of Tech' NOW -- AAPL, FB, GOOGLBut those same studies do show that the market’s seasonality has noteworthy, and tradable, effect during May and June on average.

According to our work, the Nasdaq-100 index, tradeable as the popular Powershares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ), has three seasonally weak months. On average, February, May and September perform negatively for the shares, along with much of the market.

The seasonal weakness usually accompanies selling pressure for three of the most popular tech stocks in the market. Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) make up more than a quarter of the index’s weight, meaning a weak outlook for the index usually is driven by selling pressure on these popular tech stocks.

Adding to the pressure are the current developments in the charts of these blue-chip tech stocks, offering a short-term bearish outlook and putting these stocks square on our short list.

Let’s take a look at each.

Blue-Chip Tech Stocks to Sell or Short: Apple Inc. (AAPL)

Blue-Chip Tech Stocks to Sell or Short: Apple Inc. (AAPL)

The Queen Mother of the tech trinity hasn’t been able to get traction after its quarterly earnings results and the rollout of the highly anticipated Apple Watch. Apple Inc. (NASDAQ:AAPL) has traded sideways and has been rejected at the $130 level twice.

In addition to the glass ceiling at $130, the short- and intermediate-term trendlines are rolling over, which will add to overhead pressure. Seasonally, AAPL shares struggle through the month of May, returning an average of -0.6% for the month over the last 20 years.

The technically bearish signals for AAPL come as short interest and analyst recommendations suggest the shares are mildly crowded with bullish investors.

The optimistic sentiment and technical weakness targets a move to the $113 level over the short-term outlook.

Blue-Chip Tech Stocks to Sell or Short: Google Inc (GOOG, GOOGL)

Blue-Chip Tech Stocks to Sell or Short: Google Inc (GOOG, GOOGL)

Joining Apple on the technically troubled list of tech stocks is Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL).

Over the last year, GOOGL shares have trailed the market significantly by returning less than 4% while the QQQ shares have netted more than 27%. The lackluster returns are the result of GOOGL shares being bound by a wide trading range. Last month, GOOGL failed to break through the $580 area, resulting in a move that is likely to backfill to the lower end around $490.

Blue-Chip Tech Stocks to Sell or Short: Facebook Inc (FB)

Blue-Chip Tech Stocks to Sell or Short: Facebook Inc (FB)

The darling of the social media movement has been losing ground, and it’s about to get worse.

Facebook Inc (NASDAQ:FB) shares rolled into May as one of the most-loved stocks in the Nasdaq-100. While most would think that this distinction is a positive, it’s actually not. Historically, the most optimistically rated stocks underperform the market as high expectations are harder to beat than low or no expectations.

Facebook has been underperforming the Nasdaq-100 year-to-date, despite a relatively strong March.

The technical rollover that is occurring on FB shares will get the bulls thinking more about locking in their gains from the past year, adding to the selling pressure for Facebook. Relative weakness in the tech-heavy QQQ shares should also add fuel to the selling fire for FB as well.

All in all, we see the potential for FB to trade down to the $75 mark before the technical buyers will start looking at Facebook as a relative bargain.

If you hold FB shares now, sell ‘em or hedge with puts.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.

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