After Whipsaw Swings, These Tech Stocks Are on the Rocks
Investors have to wonder if tech’s tumble is over or if the worst is yet to come.
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Some traders like to use the term “whipsaw” to describe vicious intraday swings. Thursday’s price action in the Nasdaq 100 gave us a textbook example of a whipsaw.
On Thursday morning, the Nasdaq 100 reached a six-day high. By the closing bell, though, the tech-heavy index accumulated steep losses, falling 2.3%.
The Nasdaq is trading well above its 200-day moving average (red), which is still rising. However, for the seventh consecutive session, the Nasdaq closed below its 50-day moving average (blue).
On the bright side, support is forming up in the area between 18,660 and 18,750 (up arrows). However, this is a minor support level, created over a two-week period, and could be easily broken by a close below 18,660.
A much-awaited report from Apple AAPL was better than expected, as the Cupertino-based giant beat earnings and revenue expectations. However, also after the closing bell, shares of Amazon AMZN sold off. The world’s largest online retailer reported lower-than expected net sales for the previous quarter, and guided net sales lower for the current quarter.
I’m not terribly worried about Apple and Amazon. If you own those companies, you own two of the best-run, most successful companies in the world.
However, if you own AI-related tech names, I’d consider taking profits, or maybe buying some protective puts. AI was one of the hottest sectors during the first half of this year, but now some of these stocks are falling apart. Two months ago, in early June, we warned investors to avoid several names in this sector, and those names are now collapsing.
Super Micro Computer SMCI, which is still showing a gain of 135% for the year, is at risk of giving those gains back to the market. This stock has lost 14% since we warned investors it was in danger or rolling over on June 7, 2024.
In that same article, we cautioned against buying Dell Technologies DELL, which has lost 19% since June 7, 2024. Like SMCI, Dell is barely hanging on to its 200-day moving average (red). Note that the Nasdaq 100 is well above that key indicator, demonstrating the relative weakness of SMCI and DELL.
The third name mentioned in that article, Vertiv Holdings VRT, has lost 15% since June 7, 2024.
One AI-related name I didn’t mention in the article is Nvidia NVDA. This stock looks better than the three AI stocks above, but worse than Apple and Amazon.
I think it’s time that investors took a serious look at locking in gains on Nvidia. We’ll take a deeper look at this stock next week.
At the time of publication, Ponsi was long AAPL.
