Here’s a stat that shouldn’t surprise you. Tech stocks were outperforming the market before the coronavirus crisis, and they’ve held up best during the crash.
The Nasdaq has tread water over the past six trading sessions while the S&P 500 continues pushing to new lows. This widening performance gap should have traders viewing the technology sector as one of the best places to shop for stocks to buy.
Virtually all companies will see sliding sales in the days and months to come, but large-cap tech stocks are arguably some of the best positioned to weather the storm. Their balance sheets are healthy; their cash hoards piled high. I’ve previously mentioned my favorite semiconductor companies to purchase.
Today we’re focusing on three of the biggest players in the space that have seen their stock prices fall to potential support zones. The testing of these floors could act as a beacon to would-be buyers waiting for a technical reason to finally take a bite. Let’s take a closer look at three oversold tech stocks to buy.
Oversold Tech Stocks to Buy: Apple (AAPL)
Peak-to-Trough Drawdown: -35%
At Monday’s lows, Apple (NASDAQ:AAPL) was fast approaching the $200 mark. It’s underperformed the Nasdaq-100 ETF (NYSEARCA:QQQ), which has only fallen 31% from its peak. But it’s not the relative performance that has me eyeing AAPL stock here – it’s the price chart. Thus far support areas have melted in the face of the market’s fiery plunge, but I suspect enough damage has been inflicted that spectators may finally start to assemble as dip buyers at logical levels on the chart.
Last year we saw multiple rallies stymied near $215. Once the resistance zone gave way, Apple shares took flight. We’re now retesting the area, and it’s holding as support. Much more upside is needed before its downtrend turns, but if you’re in the mood for bottom fishing in tech stocks, this spot looks as good as any.
The Trade: Sell the April $200/$195 bull put spreads for around 70 cents.
Alphabet (GOOGL, GOOG)
Peak-to-Trough Drawdown: -34%
Alphabet (NASDAQ:GOOGL, GOOG) has matched the cadence of Apple’s descent, breaching all major moving averages in the process. The daily chart remains a mess, and I’m actually unimpressed by its lack of follow-through after Tuesday’s sharp up-gap. And yet, I find the weekly time frame intriguing. Monday’s selloff came within $8 of the psychologically significant $1,000 level. Buyers swarmed to its defense, sparking a robust rebound.
This is the sixth or seventh time that $1,000 has halted a decline over the past two years. It’s also the location of the rising 200-week moving average. If you’re willing to bet this floor holds, then bull put spreads are worth a shot.
The Trade: Sell the April $900/$890 bull put spread for around $1.00
Peak-to-Trough Drawdown: -31%
Its slight outperformance and healthier price chart make Microsoft (NASDAQ:MSFT) the best in show for today’s selections. Though it fell below the rising 200-day moving average during last week’s bloodbath, it’s very close to pushing back above it. The weekly view reveals $132 has been a gathering ground for traders, providing both resistance and support multiple times in 2019.
Yesterday’s surged off that level and could spark a much-needed recovery if we see follow-through to today’s broad market rally. The weekly retracement is probably one of the cleanest in the sector and makes MSFT one of the easiest picks for buyers.
The Trade: Sell the April $125/$120 bull put spread at 75 cents.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!