Tech stocks are looking to stabilize following Tuesday’s brutal session and Wednesday’s modest hangover. With many names well off their highs and the market finally shaking its string of ten straight overbought sessions, we are looking for places to put some of our robust 10% cash position to work. Following Tuesday’s sell-off, we wrote about how we see the positives in this market outweighing the negatives. Ahead of Wall Street’s open Thursday, we’re looking at the charts of our four mega-caps with buy-equivalent 1 ratings. We’re focusing on the 1-rated names — Amazon , Meta Platforms , Microsoft , and Nvidia — because we already see them as buyable based on their fundamentals. However, given that September has historically been the worst month of the year for the market, we’re layering in some technical analysis to identify some buy levels. Methodology We are conducting this technical analysis from the perspective of a new money investor looking to initiate a position or someone with an existing position sitting in the loss column where another buy could help lower their cost basis. For those with existing positions, this exercise can help dictate when might be a good time to consider breaking basis, should you feel the need to get a bit more exposure. That, however, violates our discipline and should not be done lightly. Our analysis can also inform members these stocks are trading at so-called “battleground levels,” which may prompt you to adjust your exposure accordingly. We published our prior buy levels analysis on June 26. So, in Thursday’s commentary, we’re going to look at how these levels held up and provide some updated levels where needed. We are fundamental investors who believe that technical setups work until they don’t, and fundamentals work until they change. We would never buy a stock if we didn’t like the fundamentals, no matter how good the chart looks, nor would we advise bailing on the broken stock of a company that appears to us to have very strong fundamentals. Let’s look at what the charts are telling us. Amazon : Last time around, we called out three levels: $183, $166, and $162. Since then, shares got as low as $151.61 on an intraday basis before rallying back to around the $180 level and now sit under $175. Clearly, we should have been a bit more conservative in our buy levels, however, in our defense shares only traded below $162 for two days. We bought 75 more Amazon shares for the Club portfolio on Aug. 12 at $168.20. Looking at the current chart, the first clear-cut positive is that since the Aug. 5 selloff, we’ve reclaimed the 200-day moving average as support, meaning we were below it and moved back above it, and for the most part seem to be successfully retesting it now. Given that, we think members can step in now, or wait to see if shares move back to around $172. However, in that case, many technical analysts might still advise waiting for another successful retest and paying up $1 or $2 per share, the argument being that it’s worth it to pay up if you have another successful retest of support in the rearview. Below the 200-day, the low-$160 area still looks attractive. However, we must be mindful that a move there would once again mean we’ve broken below the 200-day moving average. So, more caution is warranted, which can be expressed via the implementation of “wider scales,” meaning you wait for larger declines between buys than you normally would otherwise, in acknowledgment that the stock is in a bit of No Man’s land. On the flip side, we are now below the 50-day moving average. So, that’s now considered resistance. Meta Platforms : Last time around, we identified four levels: $480, $465 $450, and $415. Since then, shares got as low as $442.65 on an intraday basis before rallying back to around $540 and now sit at about $514, bouncing of the $505-per-share 50-day moving average. Looking at the chart now, we think members could take a stab here given that buyers did, indeed, swoop in and buy up shares at the 50-day moving average. You could wait for a retest of the moving average — but if you don’t yet have a position, it’s worth keeping in mind that you’re risking missing out a further move to the upside to hopefully save yourself about $9 a share, or a little less than 2%. Sometimes, it’s better to just pay up, rather than be too cute. Our recent Amazon purchase also abides by this philosophy. Below $505, we would wait to see if shares trade down to just under $460 apiece as that still appears to be a solid level of support where we see the 200-day moving average. We will need to circle back and reassess given a break below the 200-day is quite significant in the realm of technical analysis. Meta shares are currently trading at about 21 times 2025 estimates, which is in-line with the five-year historical average. Members wouldn’t be wrong to consider a buy somewhere in between $470 to $480 as weakness from here would result in undervaluation versus the five-year average. Take your cue from the stock and look for some consolidation or an intraday reversal on heavy volume, which is key to determining the authenticity of a move, as opposed to buying a “falling knife.” Upside resistance from here would simply be the all-time high, just above the $540 level. Nvidia : Last time around, we called out three levels: $120, $110, and $100. Since then, shares got as low as $90.69 on an intraday basis before rallying back to around $130. They now sit at about $108. You would have been glued to your screens to pick up anything under $100, or have limit buy orders in place, because shares tend to quickly recover. From here, we would keep an eye on the $100 level again as we look for the August low to be an area of support. We can also see that $95 was previously an area of resistance that we overcame. So, somewhere in that $95 to $100 range is a place to target your first buy should we see any further weakness from here . Below that and we’re looking for the 200-day moving average to hold at around $89 apiece. A buy there would make sense, however, for those a bit more cautious, it may pay to wait and see if support does come in. Better to pay a bit more for the knowledge that such a key technical support trend did indeed hold. Microsoft : Last time around, we cited four levels: $430, $420 $400, and $390. Since then, shares got as low as $385.58 on an intraday basis before rallying back to around $425 and now sit at about $410 a share. Shares are in a bit of a tough spot, currently trading below the 200-day moving average. That said, we do think that of all the mega caps, this is the one most likely to bounce back the fastest given expectations for Azure growth to reaccelerate in the back half of Microsoft’s fiscal year. The stock currently trades at 28.5 times fiscal year 2025 earnings, a bit below the 29 times forward five-year historic average. Any further weakness from here just makes the stock more undervalued in our view. Should we see further weakness from here, we would be looking at $400, with only minor exceptions, has proven an area of support since it was taken out back in January. We would also watch $390, which has been a level of support ever since the stock broke out above the low-$380s region. (Jim Cramer’s Charitable Trust is long AMZN, META, NVDA, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Tech stocks are looking to stabilize following Tuesday’s brutal session and Wednesday’s modest hangover. With many names well off their highs and the market finally shaking its string of ten straight overbought sessions, we are looking for places to put some of our robust 10% cash position to work.
Read the full article here
News Room
