Tech stocks are opening lower this morning on the heels of a revenue warning from Apple (NASDAQ:AAPL). Today we’re shopping for the strongest tech stocks to buy into the weakness.
Pre-market NASDAQ futures are pointing toward a down gap of 0.50%. It’s not terrible but will provide clues as to whether the undying bid beneath the surface is still alive and well. If you’re looking for a silver lining, many high-flying tech stocks needed a pullback anyways. The Apple news provides the catalyst required for profit-taking to strike. Now we just need sellers to press their advantage for a few days.
I’ve scoured the technology sector and found three particularly impressive gainers over the past month. All are attractive stocks to buy on weakness.
Nvidia (NASDAQ:NVDA) is such a powerhouse. Momentum traders dominate the name and have created massive volatility. Their affection lives in the extreme. When they hate NVDA, it gets destroyed. When they love it, it gets bid to the moon. The past eighteen months have seen a round-trip move from down 60% and back to record highs.
The latest upswing was topped off by Friday’s outsized earnings gap, which jammed NVDA stock to a new record. The momentum surge suggests any retreat will be a buying opportunity. I’m eyeing the gap fill area near $275 as the first low-risk entry point — if it even gets there.
Bull put spreads are my weapon of choice.
The Trade: Sell the March $260/$255 bull put for around 70 cents.
The next pick is perhaps the most obvious. After being stuck in the mud during the back half of 2019, Amazon (NASDAQ:AMZN) reclaimed its title as a must-have stock with a barn-burner of an earnings report. Investors cheered the sales and revenue growth, gifting the online retail king with $181 overnight.
We have since seen strong upside follow-through confirming buyers embraced the higher prices and are more than willing to pay up for access. Thursday and Friday saw a slight two-day pullback that looks to continue this morning. A retreat toward $2,050 would have spectators everywhere salivating. It will take a bigger scare than this morning’s mild down gap, but I suggest deploying bull trades regardless of how deep the retracement runs.
Once again, my preferred strategy is a bull put.
The Trade: Sell the March $2020/$2015 for around $1.05.
IBM (NYSE:IBM) has provided little reason for excitement over the past year, but I’m willing to forgive its weak ways in light of this year’s sudden strength. Institutions swarmed in a big way following last month’s earnings report. The surge in volume suggests this rally could have staying power. The breach of previously dominant resistance zones also weighs in favor of a bullish view. Friday’s whack and this morning’s weak open are creating what is likely a dip-buying opportunity.
While there’s always a chance the recent upswing was a ruse, I’m willing to bet buyers emerge to defend the new trend on a test of the 20-day moving average or old resistance near $145.
If you think IBM will be above $145 at March expiration, then consider selling bull puts.
The Trade: Sell the March $145/$140 bull put spread for around 80 cents.
As of this writing, Tyler Craig held bullish options positions in NVDA. For a free trial to the best trading community on the planet and Tyler’s current home, click here!