Technology stocks have seen some significant selling over the past two trading days, as profit-takers sold into the lighter trading volume. The short-term reversal in some names appears to be providing buying opportunities.
Among the names our charts are favoring are Netflix, Inc. (NASDAQ:NFLX) and Nvidia Corporation (NASDAQ:NVDA) while International Business Machines Corp. (NYSE:IBM) appears to be a stock to continue worrying about for now.
Netflix (NFLX)
The streaming giant has been tagged-up for a 10% decline over the past two trading sessions. The massive decline could be a setup for a great buying opportunity for nimble chart watchers.
- The 10% correction took Netflix to an almost perfect test of the 100-day moving average. Currently, this trendline is sitting at $148, just below today’s lows. A hold of this trendline will maintain an intermediate-term bullish outlook.
- Through morning trading, the stock is already recovering towards a move back above its 50-day moving average. A close above this trendline will attract short-term traders into the mix as another bullish indication.
- As if it needed to be pointed out, shares of Netflix are now encroaching short-term oversold conditions as the RSI for the stock is sitting at 30. We haven’t seen readings this low since July of 2016 ahead of a short-term surge in the stock price.
Nvidia (NVDA)
NVDA is participating in the wave of profit-taking over the last two days. Since last Friday, shares of Nvidia have shed 15% or so, which is nothing compared to the 223% 12 month returns that the stock has posted. The pullback offers those sitting on the sidelines the opportunity to grab this stock on sale.
- The otherwise massive decline has shares of NVDA trading right on their 20-day moving average. Given the fact that this stock is more traded than most, the 20-day trendline will act as support for the shares.
- Nvidia shares are trading back to the $145 level which saw a consolidation in early June. A few days of trading in this price area will strengthen this price level as support and serve as a launching pad for the next rally.
- Unlike many of the tech stocks taking a beating, Nvidia shares are not registering oversold readings, instead the shares just came out of an overbought reading situation. Relative to the rest of the market, this puts NVDA as a relative bargain.
International Business Machines (IBM)
Shares of International Business Machines have been lagging the market with a year-to-date return of -5%. The stock is participating by moving higher today, but the intermediate-term outlook is still fraught with concern.
- Shares of IBM just spent the last month trading at a consolidation level of $150. Looking at the historical charts, this is a key chart level for the stock and is likely to serve as a long-term bottom. A break below this price will bring a new round of selling pressure to shares.
- A rally won’t be without its challenges. IBM stock’s 50-day moving average is declining and preparing to apply price pressure to the stock. This level is currently just overhead at $158.
- Just above the 50-day trendline are the 100- and 200-day moving averages, which are also trending lower. This implies that IBM shares are likely to remain a market laggard.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
