The Facebook (NASDAQ:FB) and Twitter (NASDAQ:TWTR) post-earnings fallout continues to weigh on blue-chip tech stocks today. The Nasdaq-100 Index is off 1% in today’s trading. Meanwhile, small-caps are slightly green on the day, which means the tech sector is suffering some serious relative weakness.
Fortunately, the downturn does have a silver lining. Many of the biggest winners during the earnings season are being weighed down to better buy points. That’s the gist of this week’s selections. We’re on the hunt for healthy, leading stocks that are being unjustly beaten due to the black cloud that FB and TWTR have cast over the entire space.
One thing that should prevent bulls from abandoning the Nasdaq and its constituents altogether is the strength of its overall trend. Despite Friday’s nasty high-volume swoon and this morning’s downside follow-through, the Nasdaq-100 remains in an uptrend above its rising 50-day moving average. While further deterioration would justify a downgrade of our expectations, thus far this dip is worth viewing as a buying opportunity.
Here are three blue-chip tech stocks coming into attractive buy areas.
3 Blue-Chip Tech Stocks to Buy: Alphabet (GOOGL)
The ranks of tech sector leaders are filled with stocks that gapped higher after earnings. These winners are all likely to be pounced on by spectators who missed out on the jump. I count Alphabet (NASDAQ:GOOGL) as one of the best. Unlike the rest of the FANG gang, GOOGL stock scored a solid price gap to record heights.
This morning’s slide is carrying the search king into its gap area toward many potential support zones. The entire area from $1,200 to $1,220 should bring buyers to the yard.
I like the idea of scaling into bull put spreads as GOOGL comes into this spot. Sell the Sep $1150/$1145 bull put for around $1.00. Consider entering more at $1.50 if the selloff persists.
3 Blue-Chip Tech Stocks to Buy: Microsoft (MSFT)
The setup in Microsoft (NASDAQ:MSFT) is virtually identical to Google. It gapped higher on earnings to new highs and has since retreated toward its rising 20-day moving average. The strength of its recent upswing registered increasing momentum across the MACD, RSI, and other popular indicators.
Buying pullbacks in uptrends that are increasing in momentum is more attractive than uptrends that are slowing. Perhaps that’s stating the obvious. If the 20-day moving average gives way, then $102.50 is the next major support zone where I’d expect buyers to step up and defend their turf.
Like the Google trade idea, I like MSFT bull puts. It provides a large margin of error in case tech remains squirrely for a spell. Sell the Sep $100/$95 bull puts for around 80 cents.
3 Blue-Chip Tech Stocks to Buy: Facebook (FB)
Our final selection is a departure from the theme. Google and Microsoft both delivered on earnings. Facebook, on the other hand, missed the mark. But it’s getting so beat up that contrarians are sure to take note. I’m interested in highlighting a few key potential support zones and then trading FB off of them if buyers show up.
With this morning’s 4% smack, Facebook is now starting to fill its earnings gap from April. I wouldn’t be surprised to see weakness persist until the gap is filled at $160. Underneath that, $150 is the next pivotal floor. I suggest stalking FB over the coming days. Any kind of probe toward either level should see an oversold bounce materialize.
To capitalize I like selling bull puts. Implied volatility remains elevated suggesting put sellers are still being rewarded. Right now the Sep $150/$145 bull put looks interesting at a 50 cent credit. Though, I would wait to pull the trigger until FB shows some signs of reversing.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
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