Tech Stocks Update

Last time I posted about tech stocks, I was pretty bearish. You can see my post for QQQQ here, AAPL here, BIDU here, and GOOG here. Since then, each of these issues has decreased in value, but not to the extent I was expecting, especially when compared to the overall market (SPX, DIA). Looking at the charts for these stocks makes me think that they should outperform as the market corrects upwards, and they may be decent buys if tight risk control is used.

Above is the daily chart for QQQQ. It looks like there was a 5-wave bullish pattern from the $41.05 low in March. If the 3-wave abc pattern holds from here, I would expect a new high above $50.50. This would provide good support for the tech stocks listed below.

Above is the weekly chart for AAPL. I thought that $192 could be the ultimate high for AAPL, but I also mentioned that if it corrected choppily in 3-waves, I would reconsider. That is in fact what has happened, and in the process, a very nice Cup and Handle formation has matured. Volume has been dropping nicely into the handle, indicating diminishing interest and selling pressure, even in the wake of massive declines in the S&P 500 and Dow. I would buy some AAPL if price broke above the handle on volume 25-50% greater than normal, with a stop below the recent trend low. The new 3-G iPhone could prove to be very good fundamental support.

Above is the weekly chart for BIDU. The stock has also been much stronger than I thought (though it is marginaly lower than when I posted a bearish analysis for it). Notice the very distinct dropoff in volume. It is almost as though people have forgetten about BIDU, even though its fundamentals remain strong. Like AAPL, instead of selling off strongly with the market, it has consolidated into a rough Cup and Handle. It looks like it could break out to the upside, and a strategy similar to AAPL's could be succesful.

The weekly chart for GOOG (above) reiterates the themes seen in AAPL and BIDU. Volume has been decreasing, and price has been consolidating. However, GOOG seems less likely to make new all-time highs since it's so far away.

All-in-all, it is amazing to see how well these stocks have held up. With betas of 2+, I would have expected these stocks to drop twice as hard as the indicies. Instead, they have dropped less than the indices on decreasing volume. It'll be interesting to see how strong they are if the market turns up.