3 Tech Stocks to Buy as Their Trends Reverse Higher

tech stocks - 3 Tech Stocks to Buy as Their Trends Reverse Higher

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The market recovery reached two significant milestones Tuesday. First, the S&P 500 closed above its 200-day moving average, officially placing it back on the high side of all major averages. Second, the Nasdaq, which has seen serial underperformance, closed above its 50-day moving average for the first time in over three months. The technical improvements had me scanning for the best tech stocks to buy.

I found many noteworthy candidates.

Tech stocks have been hit the hardest in recent months, making them a challenging choice for bullish trades. Far better opportunities have beckoned in commodity-related areas like miners and oil stocks.

But with the Nasdaq reclaiming the bullish side of the 50-day, bulls have officially returned, and sentiment seems to be warming to tech.

Here are three popular picks that boast reversal patterns worth playing:

  • Microsoft (NASDAQ:MSFT)
  • Salesforce.com (NYSE:CRM)
  • Advanced Micro Devices (NASDAQ:AMD)

Two of them have already broken out and completed their bottoming bids. The third is knocking on the door of its resistance break right now. Let’s take a closer look.

Tech Stocks to Buy: Microsoft (MSFT)

Microsoft (MSFT) stock chart with double bottom breakout

Source: The thinkorswim® platform from TD Ameritrade

Tech giants are awakening across the sector. But some have run too far to justify new entries. Microsoft isn’t one of them. In fact, with Tuesday’s 1.6% rally, the software giant cleared resistance at the psychologically significant $300 level. It also confirmed a double-bottom pattern while blasting through the 200-day moving average.

This is the best MSFT stock has looked this year. It could certainly participate in a market pullback, but I suspect we’ll form a higher pivot low to match the higher high we just developed.

To create higher odds of success, I’m going with a short put spread as my play of choice here.

The Trade: Sell the 22 April $280/$275 bull put spread for 60 cents.

It’s a bet that MSFT stock will be above $280 at expiration.

Salesforce.com (CRM)

Salesforce.com (CRM) stock chart with double bottom breakout

Source: The thinkorswim® platform from TD Ameritrade

As a Saas company lumped in with growth stocks, Salesforce.com has participated fully in the market’s unraveling. From peak to trough, the leading cloud company tumbled 41%. Fortunately, the past month has seen promising price action. Indeed, CRM stock has mirrored MSFT to a certain extent.

Two old resistance pivots have given way, and prices just took out the 50-day moving average. Rather than sell-off aggressively like the last half a dozen bounce attempts, CRM stock has held firm. At the same time, we’ve seen a pair of booming bars on the volume study to suggest institutional accumulation.

Once again, I’m favoring the higher probability route of selling puts spreads over buying calls.

The Trade: Sell the April $200/$195 bull put for 60 cents.

Tech Stocks to Buy: Advanced Micro Devices (AMD)

Advanced Micro Devices (AMD) stock chart with bullish breakout imminent.

Source: The thinkorswim® platform from TD Ameritrade

Today’s final admission for tech stocks to buy is a semiconductor darling. Advanced Micro Devices stuck the landing at $100 three times and has rallied back to test its descending 50-day moving average. Last week, Nvidia (NASDAQ:NVDA) sailed through its 50-day and fully reversed into an uptrend. I think AMD stock will follow suit.

The past two trading sessions saw resistance at $118, so that’s the level we need to rise above to trigger today’s idea. One benefit to the recent consolidation is it gives the stock plenty of gas in the tank for follow-through if it can breakout.

Consider $133 the next stop. To offer variety to the previous two put spreads, let’s go with a more directional call spread.

The Trade: Buy the May $120/$130 bull call spread for around $3.30.

You’re risking $3.30 to make $6.70 if AMD sits above $130 at expiration.

On the date of publication, Tyler Craig was long AMD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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