Earnings season is winding down, and traders now have a slew of new sales data to salivate over. The overarching theme of the quarter is that tech stocks rule the world. The giants of the sector just unveiled record-setting sales numbers. While the global pandemic brought many industries to their knees, it helped further entrench the likes of Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) at the top of the food chain.
Buyers have returned to the Nasdaq in a big way this week, bringing the tech-heavy Index inches from an all-time high. To celebrate the resurgence, we’re taking a look at three of my favorite setups in the sector. In light of my lead-in, you shouldn’t be surprised by two of the selections. The third one has fallen from the spotlight in recent months due to serial underperformance. But its technicals are starting to shine, and they demand a mention.
That said, here are three shining tech stocks to buy:
Let’s take a closer look at their price charts and identify an options trade to capitalize.
Tech Stocks to Buy: Apple (AAPL)
Apple smashed earnings expectations, but to the surprise of many, its stock price shrugged. The easy answer to those wondering about the lackluster response is that the Street had already priced it in. In other words, those who bought the rumor of robust earnings sold when the news arrived. If you’re looking for a silver lining, it’s this. You know, have a dip to buy.
So far, the selling has been minimal and contained. We’re still above the rising 50-day and 20-day moving averages. We also have a clean entry point at $136.31, which, if broken, will signal the next advance has begun. I like using old resistance as the first target. Beyond that mark, $150 comes into play.
Implied volatility is down after earnings, suggesting long premium plays are attractive.
The Trade: Buy the April $135/$145 bull call spread for around $4.
Unlike Apple, Microsoft held firm after its profit-laced report. Had it not ripped 10% in the week preceding the event, its price likely would have gapped even higher, but, once again, the market discounting machine was on point ahead of the event. Still, the behavior since the news has been bullish. The rally that carried MSFT into the quarterly dance is continuing afterward.
Wednesday’s 1.5% gain resulted in a fresh record high, giving us another reason to bet with buyers. Volume patterns also weigh heavily in favor of shareholders here. The run-up into earnings came amid heavy accumulation. Such a groundswell in participation signals big money was entering the fray and is fully supporting the uptrend.
While overbought conditions are starting to seep in and could precipitate a pause or pullback, MSFT stock should continue to work its way higher over time.
The Trade: Buy the April $245/$255 bull call for around $4.
While many tech stocks are courting new highs, some are just now starting to rise. Salesforce has sat out the past four months of the broader bull market. Instead of soaring with its sector, CRM stock has spent its time filling last August’s monster price gap. Now that it’s finished and the 200-day moving average has caught up, the longer-term uptrend seems to be taking back over.
Tuesday’s jump above the 50-day moving average confirms a bottom is likely in, and Salesforce is ready to get back to the business of trending higher. There’s a lot of choppy price action once we run into $245, so this trade will require some patience. But if there’s one thing the market has taught us in recent years, it’s that eventually, everything gets dragged higher.
I think CRM stock will prove no different.
The Trade: Buy the April $240/$250 bull call spread for $4.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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