The Nasdaq 100 has outpaced the S&P 500 by about 20% year to date, but we are starting to get warning signs from some of the stocks that have led the Nasdaq's charge.
First up is Amazon (AMZN). This stock has formed a double top pattern, highlighted in yellow. That pattern projects the stock to around $2700, although the stock’s 50-day moving average (green) may provide some additional support.
Amazon also received a sell signal from its MACD indicator, highlighted in light blue. That signal occurred on July 16. Amazon is scheduled to report second quarter earnings on July 30 after the closing bell.
Now check out Microsoft (MSFT), which reported earnings last week. If you look at this chart, you’ll see that it’s very similar to Amazon’s. In addition to the double top and the MACD sell signal, a lower high (LH) and a lower low (LL) are visible.
Does this mean it’s time to dump Amazon and Microsoft? Not necessarily. These are high-beta stocks in a strong market. The bearish patterns aren’t huge, so they don’t point to major losses.
However, it could mean it might be time to roll some profits out of those names and into some unloved sectors, like financials and energy.
Amazon and Microsoft aren’t the only big names that have slipped in recent days. Netflix (NFLX), Tesla (TSLA), and Apple (AAPL) are all off their highs
I’m not saying it’s time to bail out of high-beta tech, but when it comes to moving a portion of my portfolio in anticipation of sector rotation, I’d rather be early than late.
Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.