Momentum Shifts Downward for Older Technology Stocks

NEW YORK (TheStreet) -- All nine of the tech stocks that I profiled in June had year-to-date gains of 10% to 40% at that time, but since then, momentum has shifted to declining for six of the stocks, as shown in the first "crunching the numbers" table.

The last company of the nine to report quarterly results is Hewlett-Packard (HPQ) , which will report after the closing bell on Wednesday. Analysts expect the company to post earnings of 89 cents per share as its turnaround continues.

Since June 13, Intel (INTC) , Microsoft (MSFT) and Apple (AAPL) are the leaders up 15%, 9.4% and 8.7%, respectively. Strength in these stocks has helped the Nasdaq Composite index set a new multiyear intraday high at 4509.16 on Monday.

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Here are the latest profiles for the nine old tech stocks. Two "crunching the numbers" tables follow.

Apple ($99.16) traded at its 2014 intraday high at $99.44 on July 29, and dipped to its 50-day simple moving average at $93.90 on Aug. 8 with the average now at $94.61. On Monday, Apple was knocking on the door of a new high, but stalled at $99.37.

The weekly chart is positive but overbought with its five-week modified moving average at $95.43. Monthly and annual value levels are $89.84 and 81.33, respectively, with a semiannual pivot at $95.32 and weekly risky level at $100.24.

Adobe Systems (ADBE) ($71.06) popped to an all-time intraday high at $74.69 on June 18 after the company reported better-than-expected earnings on June 17. The open on June 18 was at $73.82, which was the sell level for investors who were looking to book profits using a good 'til canceled limit order to sell strength to the quarterly risky level at $72.23.

The stock traded as low as $67.57 on Aug. 7, and rebounded to its 50-day SMA at $70.83 after being below it since July 31.

The stock is up 6.3% since June 13, but its weekly chart shifts to negative given a close on Friday below its five-week MMA at $70.09. A semiannual value level is $62.44 with a weekly pivot at $69.72 and quarterly and monthly risky levels at $72.23 and $73.25, respectively.

Applied Materials (AMAT) ($22.10) set a multiyear intraday high at $23.46 on July 7, and broke below its 50-day SMA at $21.82 on July 24, trading as low as $20.48 on Aug. 8. On Friday, the stock gapped back above its 50-day SMA, which is now at $22.10.

The stock is down 1.2% since June 13, and its weekly chart shifts to negative given a close on Friday below its 50-day SMA at $21.81. Weekly and semiannual value levels are $21.51 and $18.63, respectively, with a quarterly pivot at $22.07.

Hewlett-Packard ($35.34) has been moving sideways to up since June 13, trading as high as $36.21 on July 29, which was above its 50-day SMA of $34.60.

The stock is up 0.5% since June 13, and its weekly chart shifts to negative given a close on Friday below its five-week MMA at $34.80. A quarterly value level is $30.97 with a weekly pivot at $35.25 and monthly and annual risky levels are $37.34 and $40.20, respectively.

Intel ($34.41) set a multiyear intraday high at $34.83 on July 22, and fell to $32.39 on Aug. 6, staying above its 50-day SMA at $32.

The weekly chart is positive but overbought with its five-week MMA at $32.72. Monthly and semiannual value levels are $32.04 and $29.79, respectively, with a weekly risky level at $35.57.

Microsoft ($45.11) set a multiyear intraday high at $45.71 on July 17, and dropped to a test of its 50-day SMA at $42.77 on Aug. 6.

The weekly chart is neutral with its five-week MMA at $43.52. Monthly and semiannual value levels are $42.73 and $41.67, respectively, with a weekly risky level at $45.20.

Oracle (ORCL) ($40.64) set a multiyear intraday high at $43.19 on June 19, and gapped below its 50-day SMA at $41.31 on June 20 after the company reported earnings on June 19 that missed estimates. The stock traded as low as $39.53 on Aug. 4, and then rebounded to its 50-day SMA, which is now at $40.75.

The stock is down 3.6% since June 13, but its weekly chart shifts to positive given a close on Friday above its five-week MMA at $40.40. Semiannual and annual value levels are $38.85 and $34.92, respectively, with annual and quarterly risky levels at $42.23 and $42.72, respectively.

SanDisk (SNDK) ($94.27) set an all-time intraday high at $108.77 on July 16, and gapped below its 50-day SMA at $98.62 on July 17 on a cautious forecast following its earnings report release after the closing bell on July 16. SanDisk traded as low as $90.66 on Aug. 7, with its 50-day SMA now at $98.46.

The stock is down 4.3% since June 13, and its weekly chart profile stays negative given a close on Friday below its five-week MMA at $94.98. Weekly and semiannual value levels are $92.35 and $79.56, respectively, with quarterly and monthly risky levels at $98.37 and $100.36, respectively.

Texas Instruments (TXN) ($47.56) has been trading back and forth around its 50-day SMA, which is now at $47.82, since April11, and fell as low as $45.60 on Aug. 7.

The stock is down 1.6% since June 13, and its weekly chart shifts to negative given a close on Friday below its five-week MMA at $47.36. Semiannual and annual value levels ate $41.08 and $34.21, respectively, with a weekly pivot at $47.47 and monthly and semiannual risky levels at $48.66 and $49.32, respectively.

Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics

This table provides the technical status for the stocks profiled in today's report.

The table also shows its 12-month forward price to earnings ratio and dividend yield.

There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.

The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.

Interpretations: (stocks below a moving average listed in Red are below that moving average)

Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.

A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.

A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.

A stock with a neutral technical rating has a profile that is not positive or negative.

The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three- to five-year horizon.

The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.

The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.

The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six- to 12-month horizon.

Crunching the Numbers with Richard Suttmeier: Earnings & Where to Buy & Where to Sell

This table shows the date the company reported quarterly results, the earnings per share and the beat or miss.

The table then presents the levels at which to buy on weakness and where to sell on strength.

Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.

Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.

At the time of publication, the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

 

 

TheStreet Ratings team rates MICROSOFT CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MICROSOFT CORP (MSFT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MSFT's revenue growth has slightly outpaced the industry average of 11.6%. Since the same quarter one year prior, revenues rose by 15.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MSFT's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, MSFT has a quick ratio of 2.31, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to its closing price of one year ago, MSFT's share price has jumped by 36.84%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MSFT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has significantly increased by 61.17% to $9,514.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 40.82%.

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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