As Traders Abandon 50 BPS Cut, Tech Sector Sees Some Fantastic Setups
A rally reminiscent of the panic buying we see during bull markets has created a compelling opportunity in this tech name.
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I don’t think traders have put the debate behind us yet, but they sure killed the concept of a 50 basis point rate cut in September.
Many of us assumed it was not even on the table in any practical sense, but it seems to have taken the market around 90 minutes of trading on Wednesday to come to the same conclusion.
The rally that kicked off around 11 a.m. ET reminds me of the panic-buying rallies we experience during bull markets. I am not ready to declare the bull back on, but there are some fantastic setups and breakouts in the tech sector. The energy sector, on the other hand, not so much.
MongoDB MDB was a post-earnings name that caught my eye. The stock gapped higher into an unfilled gap from late May. I expected shares to make a run to $310, but they stalled around $295.
While the market has bounced around, this sideways action has created a bullish flag pattern. Wednesday's close was the highest we’ve seen since the May gap lower. The channel creates the potential of “a pause that refreshes.”
Unless the market completely falls apart, I still view $310 as the minimum short-term upside; however, I think MDB ultimately pushes through $310 in early Q4 or sooner. The strong crossover and follow-through in the full stochastics indicator has been a reliable indicator of a move this size since 2022.
A close above $310 will give us new support at $310, with secondary support around $295. Although I don’t believe MDB can recover to its May highs, I see the $335 to $340 range as a realistic upside over the next four months. The strong crossover and follow-through in the full stochastics indicator has been a reliable indicator of a move this size since 2022.
If MDB isn’t your style, simply look around the semiconductor sector. A name like Arm Holding ARM had a great breakout on Wednesday.
One sector I see as needing a rest is commercial real estate. I’m looking for a 2% to 3% retracement in the Vanguard Real Estate ETF VNQ. I’m apt to step aside until we see a test of the 21-day exponential moving average (EMA). For now, my eyes are back on tech.
At the time of publication, Byrne was long VNQ.
