Taking Action on AMD, Alphabet and Meta After Steep Nasdaq Selloff
After the Nasdaq’s worst day in 19 months, we’re making these moves. Plus, if a bounce occurs, here’s what investors should do.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Nasdaq Composite had its worst day in 19 months, losing over 5.5% Thursday. The tech-heavy index closed below its 200-day moving average (red) for the first time in over six months.
On the positive side, the selloff was orderly, a sign that market participants aren’t panicking. On the negative side is the fact that the major indexes all closed at or near their lows. The absence of a sustained rally off the lows could be taken as a sign that further selling is likely.
Before that happens, the index could bounce from here, as Thursday’s close (point B) is near in price to the index’s six-month low (point A). If that bounce occurs, investors should use it to further lighten up on tech, especially anything related to artificial intelligence and data centers.
AMD in Full Retreat
Shares of Advanced Micro Devices (AMD) fell by 17.26%. AMD is now down 37% since setting an all-time high just one month ago. Amazingly, this stock is still up by over 80% year-to-date.
AMD closed beneath its 200-day moving average (red) for the first time this year. The selloff occurred on the stock’s heaviest volume since May. The high volume, plus the fact that the stock closed at its low of the day, indicates that any rally from this point is likely to be short-lived.
AMD soared after our initial recommendation to buy at $105. After reducing our shares by half late last year, and cutting the remainder by half again this past summer, we closed the final 25% of our AMD position Thursday.
We’ve now completely exited the AI chip sector, with the exception of a miniature 25% position in Nvidia (NVDA).
A Meta Headache
We also cast off our recently opened position in Meta Platforms (META) for a loss of about 4%. Meta could be headed for $520 (black horizontal line). The stock bounced sharply from that area in March for a gain of 32% (point A), and again in August for a gain of 47% (point B). If we can get Meta in the $520 area, we’ll consider buying the stock again.
Alphabet City
We’re still holding Alphabet (GOOG), another recent purchase, because that stock has held up very well under pressure. Alphabet continues to hold above a major support level (black line) that has generated two strong bounces (points A and B).
Alphabet demonstrated impressive strength during Thursday’s selloff, falling by less than 2%. If the market bounces from here, Alphabet could fly. On the other hand, if the parent company of Google and YouTube breaks below support, we won’t hesitate to cut our losses.
Stalwart Staples
One encouraging aspect of Thursday’s price action was the relative strength of the consumer staples sector. The State Street Consumer Staples ETF (XLY) actually gapped higher at the open, and closed lower by less than 1% in a very red market.
Kimberly-Clark (KMB) gained 1.5% for the day. Shares of the personal care and hygiene products company have now gained 12% since we recommended the stock in September (arrow).
We’ll continue to move away from tech, and allocate more funds toward consumer-focused names like Kimberly-Clark.
At the time of publication, Ponsi was long NVDA, GOOG and KMB.
