The recent market rout sent bulls running for cover and fear metrics into the stratosphere. The panic reached levels seen only once or twice a year, and reflect just how freaked out the latest turn in the trade war has made investors. But a bounce is looming, and I have three large-cap tech stocks to buy.
Yesterday the Nasdaq notched its first accumulation day since the bloodbath began. The high-volume rally is the first sign that institutions are wading back into the waters. And while more confirmation is needed, it does give beleaguered bulls the first ray of hope that their torture could be coming to an end.
This morning’s follow-through should further embolden buyers and signals the rally could have staying power. Today we’ll look at three tech stocks to buy.
3 Tech Stocks to Buy: Apple (AAPL)
Apple (NASDAQ:AAPL) finds itself in its second-largest correction of the year. Ironically, both transpired after earnings reports that initially sent the stock higher. Both episodes provide examples of the so-called “buy the rumor, sell the news” phenomenon, where traders buy in anticipation of good news (or earnings), and sell when the news hits.
Last quarter’s post-report beatdown ultimately proved a buying opportunity, and I suspect this one will prove no different. AAPL stock passed yesterday’s support test and was able to push back above the 50-day moving average. Since volatility is elevated and choppy price action could persist for a spell, I suggest using higher probability strategies offering a wide range of profits like the bull put.
If you’re willing to bet AAPL stays above $185 for the next month, then sell the September $185/$180 bull put spread for around 85 cents.
Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG) earnings launched the king of search up $100 last month. Unfortunately, its rocket ship ride to the moon was cut short by the recent broad market temper tantrum. The pullback we’ve since seen filled Alphabet’s earnings gap, giving traders a second shot at buying shares on the cheap.
The area of Google’s stock bounce wasn’t a coincidence. Buyers emerged right where they should have to defend old resistance and the gap fill zone. That makes this as good a buy area as any. Like AAPL, I suggest bull puts which provide a wide range of profit to decrease the chance of getting whipped out if market volatility persists.
Sell the September $1070/$1060 bull put for $1.25. Consider it a bet that GOOGL sits above $1,070 at expiration. The reward is limited to the initial $1.25 premium, and the risk is $8.75.
Microsoft (NASDAQ:MSFT) has been a top tech stock to buy for all of 2019, and it remains so even after last week’s whack. Compared to the bloodbath elsewhere, MSFT stock’s retracement wasn’t bad at all. From peak-to-trough the sultan of software only fell 6.7%, and the rebound since has quickly erased most of the loss.
Yesterday’s hammer candle plus this morning’s nearly 1% pop is pushing MSFT back above the rising 50-day moving average. Rather than swing for the fence with a call buy or more aggressive spread, let’s continue the trend of high probability cash flow plays with another bull put idea.
Sell the September $130/$125 bull put spread for $1.05. Your max reward is $1.05 and will be captured if MSFT stock sits above $130 at expiration. The cost (and risk) of the trade is $3.95.
As of this writing, Tyler Craig held bullish positions in GOOGL. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.