Upside Is Limited for the Nasdaq

Tech stocks stabilize, but the upside for the Nasdaq should be limited.

Friday's decline on the Nasdaq makes it easier for the tech stocks reporting earnings this week, but don't get overly optimistic. Be selective and look for undervalued tech stocks on weakness to value levels.

There has been some technical chart damage, which should limit a tech-led rebound by the Nasdaq. The daily chart profile is negative, with the 50-day simple moving average at 2251 and this week's pivot at 2260. A close this week below the five-week modified moving average of 2252 would shift the weekly chart profile to negative, indicating risk to my quarterly support of 2159.

Texas Instruments(TXN) reported after the close Monday and EMC (EMC) before the bell Tuesday.

TI reported fourth-quarter EPS of 43 cents, beating the consensus by a penny. Revenue for the quarter was a bit shy of estimates, which gave shares a modest haircut. With a negative weekly chart profile, the stock should stay below its five-week modified moving average of $32.61, with risk to its 200-day simple moving average of $30.24. The stock could drop to my quarterly value level of $26.38, where long-term investors should consider buying.

EMC reported fourth-quarter EPS of 17 cents, in line with expectations, on revenue slightly above the Street estimate. Its weekly chart shows declining momentum, with the five-week MMA at $13.65 and the 200-week SMA at $11.14, so the rebound should be limited. EMC should continue to trade in a reversal-oriented pattern among quarterly pivots of $13.22 and $13.36 and a monthly pivot of $14.08. The upside above this range is to my monthly risky level of $14.77.

EMC is undervalued by enough to consider adding to a long-term portfolio at roughly $13.36 to $13.22. The downside risk below this range is to my semiannual value level of $9.74.