This week’s market volatility has many investors running for the doors with reckless abandon.
That’s too bad, because they should be considering the opportunities that the lower prices are uncovering.
We’re not recommending that investors run out and buy anything that’s down over the last week, but we are identifying some timely opportunities that are ripe for the picking:
Namely, a bunch of tech stocks that have suddenly become good rebound candidates.
In looking for these buys among tech stocks, we’ve focused on three things: strong fundamentals, supporting technical patterns and signs that the stock is not “overloved.” The last factor is vital, as stocks that are saturated with bullish investors tend to be sold more heavily during pullbacks as investors rush to sell (think the crowded theater fire analogy).
These five tech stocks are among those that fit our criteria as timely buys.
Tech Stocks That Look Sweet: Broadcom Corporation (BRCM)
Semiconductor companies are setting up to impress the market as fundamental strength is being fed by increasing demand and healthy consolidation among the group.
Broadcom (BRCM) — which focuses heavily on communications — is among the companies we’ve got our eye on as a relative strength leader for 2016.
The charts are the story for Broadcom stock as technical support is coming into play on the recent weakness. BRCM is currently finding support at its 50-day moving average while registering a short-term oversold signal from its RSI. This combination of technicals suggests that the stock is likely to recover in relatively short order the 6% it recently lost.
In addition to the technicals, the sentiment backdrop for Broadcom stock makes it attractive. Current analyst recommendations show that only 23% of those covering the stock think it’s a “buy,” leaving lots of room for catch-up upgrades as BRCM continues its outperformance.
Our models rank Broadcom stock as a “buy,” and we have a target of $65 — a 16% gain from here — over the next six months. This is definitely a rebound play on recent weakness.
Tech Stocks That Look Sweet: Adobe Systems Incorporated (ADBE)
Adobe (ADBE) has been quietly lighting it up compared to other tech stocks over the past year. ADBE, which has registered a 12-month return of 28%, finds itself among the stronger performers in the Nasdaq-100 and continues to show significant upside potential.
Adobe stock is currently ranked a 4 out of 5 by our proprietary Behavioral Valuation model due to its technical strength and investor sentiment toward the stock. The charts show a strong uptrend in the stock’s 50-day moving average, which historically translates into a 2-to-1 probability that the stock will continue to trade higher.
The fundamentals support further upgrades in the stock as earnings growth for 2016 is expected to weigh in at 32%, followed by almost 34% growth in 2017.
All of this adds up to a price target of $110 during 2016, which comes out to an opportunity of nearly 25%.
Tech Stocks That Look Sweet: Advanced Micro Devices, Inc. (AMD)
Another semiconductor stock that is grabbing our attention, especially as a short-term trade, is Advanced Micro Devices (AMD).
The last time we recommended picking up AMD shares, they were trading at $2.20 and ran to $3. Now, the charts for AMD are painting a great picture as the price has retraced from the $3 level back to $2.35, which is the site of the stock’s 50-day trendline.
The short interest ratio on Advanced Micro Devices is an impressive 14.1, which suggests that the stock is still very susceptible to another short covering rally back to the $3 range. Similarly, the current analyst recommendations on AMD shares registers only 17% buys, meaning that this stock is far from being crowded with bulls.
Strong fundamentals, short-term chart support and some seriously negative sentiment adds up to a short-term trading target for AMD shares of $3.
Tech Stocks That Look Sweet: Microsoft Corporation (MSFT)
Microsoft (MSFT) shares are trading almost 8% off their recent highs. Before the decline, Microsoft stock was making a run at its highest prices since 2000.
The charts have been improving for “Mr. Softee” as the company’s renewed focus on its operating systems, search engine and tablets are signaling a return of revenue. This week’s decline has Microsoft shares breaching their 50-day trendline, but support at the $52 level is beginning to show strength as MSFT is hitting short-term oversold conditions.
Sentiment toward Microsoft stock is tepid as 62% of the analysts covering the stock have it ranked a buy. This is up from 59% a few weeks ago as analysts have started to upgrade the stock on its performance.
Look for Microsoft stock to start seeing buying interest at the $52 level with an upside target of $60, or 14%, over the next six months.
Tech Stocks That Look Sweet: Nvidia Corporation (NVDA)
Nvidia (NVDA) stock has been one of the strongest-trending tech stocks since August 2015, moving from $20 to $34. The breakneck rally is based on solid fundamental as revenue and earnings have continued to grow on product expansion.
Analysts appear to have completely missed the company’s fundamental strengths and stock performance, as the percent of buy recommendations for Nvidia stock is a paltry 39%. In addition, short sellers have been adding to their positions lately, pushing the short interest ratio toward 6, which is where we would normally see potential for a short covering rally increase.
The recent pullback in Nvidia stock amounts to about 12% and leaves it at potential chart support at the $30 mark.
Our models identify NVDA as a short-term buy with a target price of $36 (20%) given the high potential for upgrades, short covering and the strong long-term chart.
As of this writing, Johnson Research Group had a buy limit order on AMD.
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