- Microsoft (MSFT) is richly-priced and showing technical cracks indicating a larger bear cycle.
- Coinbase Global (COIN) continues to trade with relative and absolute weakness.
- Advanced Micro Devices (AMD) is set up for price compression.
Wall Street has continued to favor doom and gloom this week. And it’s not only higher multiple growth stories that are getting hit hard. Even the best of the best have come under stiff pressure. Moreover and as we’ll see, it could be time to place a bearish trade or two in three of these large-capitalization tech stocks.
The major averages are taking a breather Wednesday as this quarter’s earnings procession kicks off with names like JPMorgan & Chase (NYSE:JPM) and Delta Airlines (NYSE:DAL) releasing results. While the early results appear mixed, it’s a welcome respite from almost uniformly bearish threats tied to Covid-19, Russia and red hot inflation data.
Further, several sessions of selling pressure in large-cap tech stocks has put the Nasdaq into a testing position of its 62% retracement level tied to its March 14 corrective low. And intraday investors are using it as support for bargain hunting with the index adding 1.60% on the session.
There’s a chance the buying could be the start of more meaningful and bullish price action. So with the current uptrend still under pressure and the market still historically expensive, let’s use the opportunity to offer three large-cap tech stocks which are showing significant technical deterioration and warning of profitable bearish opportunities.
|AMD||Advanced Micro Devices||$96.76|
Large-Cap Tech Stocks to Sell: Microsoft
Source: Charts by TradingView
Microsoft (NASDAQ:MSFT) is the first of our large-cap tech stocks to sell. The stock market’s second largest company by valuation at $2.23 trillion looks poised to enter into a larger correction for a couple reasons.
First and if you’re agreeable with The Big Short’s Michael Burry who famously made a fortune taking the other side of the 2008-2009 financial crisis, Microsoft may have problems. The investor just cautioned today’s price-to-sales ratios are trouble for stock market investors.
Right now MSFT stock fetches a lofty 11.50 times sales. That’s nearly six-fold a historically frothy S&P 500 and just off record highs for this large-cap tech stock. Further, the pricing is more than five times what investors have paid for the tech giant for the better part of the past decade.
Second and as the extended weekly chart of MSFT warns, this large-cap tech stock is also at risk.
Technically, Microsoft’s April price action has failed to confirm a monthly March hammer. Moreover, shares failed against its former Covid-19 uptrend and the 50% and 62% retracement levels associated with this year’s corrective move.
With the weekly stochastics neutralized and on the cusp of a bearish signal, this large-cap tech stock is a sell in front of a likely more menacing bear market.
Coinbase Global (COIN)
Source: Charts by TradingView
Coinbase Global (NASDAQ:COIN) is the next of our large-cap tech stocks to sell. Compared to Microsoft, the largest digital exchange operator in the U.S. may look like an absolute bargain and a bona fide growth stock on sale.
Revenues are up more than 325% year-over-year. Earnings have grown by an even slightly more tempting 375%. And investors are able to get a piece of COIN’s $35 billion valuation at just 4.3 times sales and a trailing price-to-earnings (P/E) of less than 11.
Other than commanding more than twice the S&P 500’s sales multiple (which COIN stock investors can probably be forgiven for), this large-cap tech stock seems to offer growth at a sizable discount with shares off 39% in 2022.
But investors should be mindful that Coinbase’s fortunes rest on the crypto market. And today digital currencies aren’t exactly proving themselves to be a safe haven for anything of value other than as dangerous trading vehicles.
Bottom line, I’m worried today’s fundamentals aren’t sustainable following an excessive speculative frenzy that fueled those numbers. And technically, with a bearish downtrend at all-time-lows and stochastics indicating mounting downside risk, this large-cap tech stock is all but telling investors to sell.
Advanced Micro Devices (AMD)
Source: Charts by TradingView
Advanced Micro Devices (NASDAQ:AMD) is the last of our large-cap tech stocks to sell.
Shares of AMD are another stock Michael Burry might take offense with. Today AMD stock’s hefty market cap of $165 billion is held up by a sales multiple of 7.50.
The revenue relationship is the middle of the pack as far as our three targeted sells. But make no bones about it, the large-cap stock is historically rich by that metric. As well, and priced at 38 times earnings, AMD stock is a higher-multiple growth stock that’s at a bit more risk due to today’s rising interest rates.
This large-cap tech stock may also face additional pressure due to customers potentially canceling orders for AMD’s graphics processing units (GPUs) amid softer chip prices overseas, the embargo on chip sales to Russia and likely weaker demand from consumers after a period of stronger Covid-19 related demand for PCs.
Technically, the weekly price chart in AMD is ominous and looks to confirm our concerns. Shares have traded through a bearish descending triangle and are now stationed on the stock’s Covid-19 uptrend line which resides at the bottom of a wide support zone.
Bottom line, should this last layer of support fail, and the stochastics indicator is warning it will, this large-cap tech stock may not find a floor until longer-term channel and Fibonacci come into play near $70.
On the date of publication, Chris Tyler holds long hedged positions in Advanced Micro Devices (AMD) (either directly or indirectly) but no other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.