Trading Market Leading Technology Stocks (AMX,BBRY,INTC,SWKS)
Since May, the Technology Select Sector SPDR (XLK) has taken off, out-performing the S&P 500 SPDR (SPY) by several percentage points and establishing itself as the top performing sector over the last few months. These four stocks have led the charge, racking up more than 10% gains in the last month alone. As the S&P 500 SPDR and Technology Select Sector SPDR push to new highs, keep an eye on these stocks to see if their market leadership continues, resulting in outperforming returns.
America Movil S.A.B. de C.V. (AMX) is up 22% over the last month, soaring past January resistance at $23.75.The stock has been range-bound since early 2013, so even though the high of the range has been eclipsed, it doesn’t mean a continued move higher is imminent. The range has been choppy, with many false breakouts already. Buying at these levels warrants some caution. The price has been making higher swing lows since March of 2013, indicating a major bottom may already be in place near the $19 mark. If this multi-year correction finally reverses and commences an uptrend, the first long-term target is $29, just below the 2010 high at $29.82
Research in Motion Limited (BBRY) is up 21% over the last month despite a strong pullback on July 16. In 2013 the stock got hit hard, declining from a high of $18.32 to a low of $5.44. Since that low, the stock has been trending higher. Research in Motion should now be supported below $8, putting an entry point between $9 and $8 – a wide range for a stock at this price point because of the volatility. There is still significant resistance overhead, near $12 and then again at $13.50 to $14.50. Taking profits or exiting part of the position near these levels may prove prudent if the uptrend is unable to gain traction above those levels.
Intel Corporation (INTC) was trending in a consistent channel higher from late 2012 until June 2014. It exploded higher out of the channel and is up 12.6% over the last month. This surge to a recent high of $34.74 also broke through resistance between $28 and $29.27, which has halted all advances going back to 2005. With this major long-term breakout, the longer-term outlook is positive. A target near $40 or higher isn’t unreasonable. For those not in a position yet, wait for a pullback. Between $30 and $29 is ideal, but may not occur. The $32 area is another entry point, as it should also provide support based on a significant gap higher on July 16.
Skyworks Solutions (SWKS) has had a parabolic rise in 2014 after breaking out of a multi-year triangle pattern in late 2013. The target for that pattern breakout was $51, which has now been exceeded as the price jumped 14.09% on July 18 alone. While further gains are possible, the stock is very extended so waiting for a pullback provides a better risk/reward ratio. Major volume spikes over the last year, which have been smaller than the one seen on July 18, have resulted in the price declining or stabilizing at least for the short-term. Therefore, a lower entry point is likely to present itself in the coming weeks. Skyworks is in the same industry as Intel, and while the price trajectories of the two stocks have been similar, Skyworks has been moving stronly. Therefore, watching for weakness or continued strength in Skyworks is likely to provide clues as to the next moves in both stocks.
The Bottom Line
Technology is a top performing sector, and these stocks are leading the charge. That doesn’t mean jumping in and buying at any price is a wise decision though. Plan every trade. Look for an entry point that allows you to place a stop loss not too far from it, but that still allows for a good reward to risk ratio if the uptrend continues. Only risk a small percentage of the account on any single trade, as no matter how strong the trend is, it can always reverse. In this way, even a string of losing trades won’t significantly draw down the account. And by focusing on sectors and stocks that are outperforming – which should be monitored – the potential for finding good reward to risk trades increases.
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Trading Market Leading Technology Stocks (AMX,BBRY,INTC,SWKS)
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