Stocks are headed to close out their worst week. Netflix, Inc. (NASDAQ:NFLX), Microsoft Corporation (NASDAQ:MSFT) and Cisco Systems, Inc. (NASDAQ:CSCO) are among the casualties in the tech sector following a week of heavy selling in the Nasdaq Composite. These companies have been caught up in the migration of cash that is flowing through the market into the new “Trump” sectors.
While the near-term has been a little painful for these technology giants, we’re seeing reason in the charts to start looking at them as potential buys as support begins to form for each company’s shares.
Netflix, Inc. (NFLX)
Trading as far as almost 15% from its recent highs, Netflix is finding support at the site of its 50-day moving average. The trendline currently resides at $113.57, just a hair below NFLX’s Thursday lows.
Over the last three weeks, Netflix has been one of the targets of opportunity sellers that have been looking to migrate monies into the post-election rally sectors such as materials, industrials and financials. The selling in NFLX is creating an opportunity for those willing to step in to fill the gap.
In addition to the 50-day, Netflix formed a consolidation bottom at $115 a few weeks ago as the stock registered oversold readings on its RSI indicator. This suggested that the selling pressure for NFLX shares had been exhausted, at least over the short-term, making it easier for buyers to swing the stock into a new short-term uptrend.
We should begin to see the return of buyers to the tech sector as the quarter-end approaches. With Netflix sporting support at $115, the stock should maintain its short-term relative strength and begin to lead higher again.
Microsoft Corporation (MSFT)
Like NFLX, Microsoft has been spinning its tires over the last month at the hands of sellers looking for greener pastures. Despite the selling, which has only recently affected prices, MSFT is one of the stronger names in the technology sector.
Microsoft shares were taken to their 50-day moving average on Thursday, which has been a trendline of significant support since the stock started its rally in July. Currently, this trendline sits at $59.15 and is on the rise. In a sign of strength, MSFT saw increased volume on the bounce off of the 50-day, signaling that the technical traders are viewing this as an opportunity.
Momentum remains positive on Microsoft stock as it hovers just below its all-time highs. This should help MSFT remain buoyant and within its strong intermediate-term trend, which continues to point higher.
As a backup for traders, Microsoft’s 100-day moving average is just another $1 below the 50-day at $58. Traders should view this as a “backup” support level for MSFT stock should we see any additional selling early next week.
Cisco Systems, Inc. (CSCO)
Unlike Netflix and MSFT, Cisco Systems has been leading the Nasdaq lower recently, breaking through intermediate-term support lent by its 50- and 100-day trendlines. CSCO shares have only tumbled by 7%, but they spent an extended period consolidating from August through October, which leveled the trendlines off making them susceptible to giving way.
The sharp selling after earnings resulted in the current test of Cisco stock’s 200-day moving average, which so far has been able to contain further selling.
In addition to the 200-day support, CSCO shares are now registering an oversold reading from their RSI indicator, a sign that the stock should see some opportunity buyers begin to step in and help reverse the short-term trend.
To call the current price of $29.25 a must-win for Cisco Systems would be appropriate given the technicals mentioned and the fact that this price also served as chart resistance in June.
For the short-term, CSCO shares look to gain some strength from their charts, but traders will want to be very nimble with this name as the intermediate-term technicals remain in a potential transition that could have the stock moving lower after a short-term bounce.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
