These Three 'Magnificent' Names Could Soon Bounce Higher
While we hear about weakness for the Magnificent Seven, I see three stocks to trade as they appear ripe for a rally.
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It’s been a rough week for the major indexes, and the selling might not be over. Technical traders would like to see a climatic increase in volume, a sign that the sellers are flushed out, before making a significant commitment of fresh capital.
On Thursday, the S&P 500 closed at a one-month low, and the Nasdaq Composite closed at a three-month low. The Nasdaq is down by about 2% year-to-date, while the S&P 500 is flat for the year.
The S&P 500 (left chart) and the Nasdaq Composite (right chart) are sprinting toward their respective 200-day moving averages (red). The Nasdaq in particular is getting close to that key indicator, which could provide some big-name stocks with a much-needed bounce.
Unfortunately, there is no sign of a climactic selloff on any of the major stock indexes. This means that sellers might not be finished. Buyers should consider smaller opening positions, and should only add to these positions if the price moves in their favor.
I’m watching the 18350 area on the Nasdaq for a potential bounce. If that happens, I’ll consider long positions in some of the stronger names in that tech-heavy index.
Which Nasdaq names are holding up the best during the current market selloff? Let’s go to the charts to find out.
Netflix: Keep Watching
Netflix NFLX provided investors with a solid earnings report in January, and reached a fresh all-time high earlier this month (arrow). Now the stock is pulling back, but Netflix remains above its 50-day moving average (blue), a boast that none of the major stock indexes can currently make.
The stock’s orderly pullback on average volume is telling. While institutions are selling names like Alphabet GOOGL with abandon, they’re reluctant to part with Netflix. If the Nasdaq bounces, I’m looking for Netflix to be a leader.
Meta Made Gains
Like Netflix, Meta Platforms META reached an all-time high earlier this month. Despite recent market volatility, Meta has gained nearly 10% year-to-date.
This stock is also similar to Netflix, in that Meta remains above its 50-day moving average (blue). Despite its recent pullback, the stock is up 35% over the past 52 weeks.
Apple Falls, But Could Bounce
Unlike the two names listed above, Apple AAPL has fallen below its 50-day moving average (blue). But the Cupertino-based consumer tech giant has gained about 8% since Jan. 22.
Over the past month, Apple has formed a higher-low (HL) and a higher-high (HH), indicative of a nascent bullish trend. In this sense, Apple is swimming against the tide.
It’s no coincidence that I chose three of the largest stocks on the Nasdaq by market cap. Institutions are likely to favor bigger, more liquid names during turbulent times.
My game plan is to buy these names if and when the Nasdaq Composite reaches its 200-day moving average, currently near 18,350.
I’ll be buying for a trade only, as we have yet to see the major indexes experience a climactic selloff. If the Nasdaq Composite breaks its 200-day moving average, we’ll cut our losses quickly.
At the time of publication, Ponsi was long AAPL.
