In volatile and dizzying up/down price action this week, many companies’ shares have been bloodied. But now and during a potentially bullish window for the broader averages, it’s important to look for technical strength removed from headlines of tech wrecks and potential new market leaders for tomorrow. The following three tech stocks are positioning themselves for that kind of success off and on the price chart.
Just when it appeared Wall Street was recovering from yet another doozy of a sell-off following Wednesday’s strong rally, along comes Thursday’s countering, coronavirus-driven blow to would-be bargain hunters. And if Friday is any indication, conditions for investors are only going to get worse before they get better. Or are they?
As the coronavirus unceremoniously celebrates 100,000 confirmed cases globally, fear and panic selling have clearly trumped anything resembling good news to close out the week. Friday’s strong monthly jobs report and word the Fed is on the cusp of another rate cut this month, are two market supports seemingly swept under the carpet. But there are still reasons investors need to keep a clear head and remain optimistic.
It’s important to recognize that as much as today’s market correction could turn into an uglier bear market, history also strongly urges investors to monitor the major averages for a bullish follow-through day. A follow-through day or ‘FTD’ typically occurs four to seven sessions after an intermediate market low is established.
What’s required of the follow-through day is very simple. At its core, one or more market averages need to rally by 1% or more on heavier volume during this critical window of time. And why should that matter? Well, not only is Friday day five of the FTD count, more importantly every single bull market has been preceded by this event.
Another typically important part of the FTD signaling and actually turning into a meaningful intermediate bottom is technical leadership from newer companies. These are generally younger companies executing strongly off and on the price chart in today’s market and potentially in position to become tomorrow’s Apple (NASDAQ:AAPL) or Microsoft (NASDAQ:MSFT).
Given the significance of the FTD and behavior from newer select stocks on the market’s future price direction, investors might smartly distance themselves from panic headlines warning of the end of days. Instead or at a minimum, it’s important to make room on your trading monitor for companies like the three tech stocks below. These stocks are possibly leading the market towards a more benevolent conclusion.
Zoom Technologies (ZM)
Source: Charts by TradingView
Zoom Communications (NASDAQ:ZM) is the first of our newer tech stocks in position to lead the market higher. The company’s business-driven video conferencing platform is benefiting from the coronavirus as travel screeches to a stop and demand for remote ways to carry on are seeing a lift. But a recent solid and growth-filled earnings beat also shows Zoom had the right kind of stuff going for it before the disease plaguing today’s market was even a whisper.
Now and following a solid earnings reaction, shares are pulling back into a testing position of Fibonacci and cup-shaped pattern support. Investors already long this tech stock obviously want shares to rally. Still, the healthy-looking drop is one to put on the radar to buy on today’s fear-induced weakness, but strong odds of new highs to come in conjunction with a market-based follow-through day.
SolarEdge Technologies (SEDG)
Source: Charts by TradingView
SolarEdge Technologies (NASDAQ:SEDG) is the next of newer tech stocks that’s acting like a market standout off and on the price chart. Business-wise, this alternative energy upstart has been a consistent champion. It’s a trend most recently reaffirmed with late February’s burly profit and sales-topping earnings results.
On the price chart SolarEdge shares are also demonstrating the right kind of stuff technically to take off and lead a FTD in the broader averages. Following a couple classic corrective base breakouts, this tech stock is now well-positioned to rally to all-time highs out of a weekly chart inside consolidation pattern three weeks in duration.
Spotify Technology (SPOT)
Source: Charts by TradingView
Spotify (NYSE:SPOT) is the last of our newer tech stocks in position to lead the market higher. Earnings for the world’s largest streaming music platform are admittedly a bit ‘spotty,’ as last month’s report can attest. The company is still mired in red ink and also missed Street forecasts. All the same and not unlike market leaders such as Netflix (NASDAQ:NFLX) or Amazon (NASDAQ:AMZN) as they built their brands, continued market penetration and solid sales growth are certain positives for this market disruptor.
Technically, the price chart in this tech stock is also striking the right kind of chords to become a classic.
Over the past several months shares have faltered on a handful of occasions as SPOT stock attempted to clear a band of key Fibonacci resistance tied to its lifetime price cycle. Still, there is one confirmed higher-low monthly candlestick in place. As well, February’s second pivot low is holding strongly with March’s inside price action supported by Spotify’s out-the-gate low from 2018.
The observation is this tech stock is demonstrating under-the-radar stealth strength worth monitoring. My guess is modest price confirmation above $151 would be enough for shares, once and for all, to break firmly above resistance into the right side of its two-year long base. And from there, Spotify could find itself trending to the ‘top of the charts’ in the world of investing.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits
