Technology stocks took off with the rest of the market on Monday as the Tax Reform rumors gave investors reason to shovel more cash into the market. The one-day bump has put the sellers into the driving seat again as end-of-year tax selling and profit-taking are likely to drive prices over the next week.
VeriFone Systems Inc (NYSE:PAY), Apple Inc. (NASDAQ:AAPL) and Advanced Micro Devices, Inc. (NASDAQ:AMD) are among the technology companies that are reversing their bullish ways today. While each of these stocks have been able to muster short-term rallies that have teased traders into thinking that these stocks are ready to run.
Instead though, these three tech names are now reversing course, just as the lighter holiday trading volume will allow them drift lower. Let’s look at the charts to determine if you should be a buyer or seller of these names.
VeriFone Systems Inc (PAY)
VeriFone systems announced earnings last week that disappointed the market. PAY stock reacted with an 8% decline the next day followed by a rally that erased all the losses, until this morning that is. Post-earnings rally aside, PAY stock is now running into a technical test that will determine whether shares of VeriFone will retrace to their lows or start their journey to $22.00.
- This morning, shares of PAY hit their 50- and 200-day moving average trendlines. Both trendlines are declining, indicating that they should be a bearish trigger for the stock over the short-term.
- Our observation of the Chande Trend Meter for the stock shows that VeriFone stock has yet to cross into a bullish signal. This puts the stock at risk of a false rally, which has a high likelihood of reversing over the next week.
- The $19 price has served as resistance and support for PAY stock many times in 2017. Watch for a hard reversal at this price to be a sign that the stock is going to be sold down to $18. Conversely, a break above $19 will open the stock for a move to $20.50 according to our chart analysis
Apple Inc. (AAPL)
The most popular tech stock on the Street is slowing its growth as the year-end approaches. AAPL stock often sees a “buy the rumor” rally ahead of its earnings release, now scheduled for more than a month away.
Given this, it would be “normal” to see Apple shares trade in a range.
- The top of the current range for AAPL stock is represented by the $175-price-level. This price has held shares at bay three times since the beginning of November and is currently pressuring prices.
- The bottom of the stock’s range is captured by $167 as this price has served as a bottom for Apple stock in two instances since November. The last bounce from $167 was what we refer to as a “double bounce,” which is a strong bullish technical pattern that suggests that AAPL stock is not likely to move below this support over the short-term.
- The Chande Trend Meter remains bullish on Apple shares. This tells us that the trading range environment has not taken away from the positive momentum and that the next breakout is likely to be a bullish move ahead of earnings in January.
Advanced Micro Devices, Inc. (AMD)
One of the stocks in the semiconductor sector that has lagged the most is Advanced Micro Devices. AMD stock is down a small amount, year-to-date, while the rest of the sector is up more than 40%.
Some traders are looking for this company to make a turnaround that will serve as the kickoff for a comeback rally, but the charts are saying something else.
- Shares of AMD got a boost on Monday after an upgrade from an analyst at Macquarie. The move has been short-lived as traders appear to already be selling into the strength
- Advanced Micro shares are facing chart resistance at $11. This price level has served to either support or reject AMD shares three times in the last three months. We expect to see traders sell the strength as the stock sits at $11.
- Overhead, the 50-day and 200-day moving averages are both careening lower, indicating a bearish environment for AMD shares. Traders will use this indication of momentum as a sign that they need to sell into any strength, regardless of how short.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.