It looks like tech stocks could be cruising for a bruising. The weekly chart profile of the tech-heavy
Nasdaq 100 Unit Trust
is deteriorating, sending a strong warning. It will stay negative on a weekly close below the five-week modified moving average, $41.36. The daily chart of the Qs is below its 50-day SMA at $41.59, which indicates risk to the 200-day SMA of $39.52, which was last tested in October.
On Jan. 10, I said that many of the go-go Internet names were
overvalued, overbought and vulnerable. This proved to be true for
had a mixed profile, but I favored the undervalued infrastructure names
. VeriSign rose, but Symantec and Yahoo! have slipped since then.
The fair values of some of these names have changed significantly since Jan. 9. Amazon's fair value fell to $38.28 from $41.69 on the company's disappointing quarterly earnings, and its shares are down 18.7% since Jan. 9 to its fair value. It's below my quarterly pivot of $39.40. The weekly chart profile shows declining momentum. The five-week MMA is $42.45 and the 200-week SMA of $36.33 should provide support. Consider adding to holdings on weakness to $36.33 and $34.00.
Despite a rough few weeks for its share price, Google's fair value has risen to $412.85 from $401.23 as Wall Street has continued to raise 12-month forward EPS estimates. Its share price is down 21.5% since Jan. 9, trading as low as $337.83 on Feb. 15, just above its 200-day SMA at $337.14.
Its weekly chart profile will remain negative on a weekly close below its five-week MMA of $397.50. If you like Google, its shares are undervalued -- a test of the 200-day SMA would be the first in this company's short history and an opportune price at which to add to positions on weakness.
VeriSign's fair value declined to $24.72 from $28.90 on weaker-than-expected earnings guidance, but the stock's addition to the
on Jan. 31 caused it to rise. It's up 11.9% since I suggested buying it on Jan. 10. Last week, the stock reached its fair value of $24.99 and its 200-day SMA of $24.73, which merits profit-taking. The weekly chart profile is positive with the five-week MMA at $23.02.
Websense's fair value rose to $58.97 from $56.58 on Wall Street's raised guidance, but ValuEngine doesn't like the trend of the 20 data points it reviews and downgraded Websense to sell. It's down 7.3% since Jan. 10. It traded as low as $58.68 on Feb. 17, just below my monthly pivot at $59.91 and its fair value.
I'd wait for a test of its 200-day simple moving average at $56.28 before considering adding to this position. The weekly chart profile is negative, with the five-week MMA at $63.46. If it breaks below its 200-day SMA, the risk is to my semiannual value level of $52.35.
Yahoo!'s fair value fell to $36.71 from $46.08 on its earnings disappointment. Its shares are down 25.4% since Jan. 9, trading as low as $31.70 on Feb. 13. Failure to hold my monthly value levels at $38.37 and $37.93 on Jan. 18 was a warning. The weekly chart profile is negative, with the five-week MMA at $35.60. My advice on Yahoo! is to wait until my next update in March to see if a new monthly value level has formed.
Symantec is down 11% since I suggested buying the stock. It traded as low as $16.74 on Feb. 6 after failing to hold its annual pivot at $19.50. Right now, I don't have a value level at which to add to this holding. The weekly chart profile is neutral, with the five-week MMA and 200-week SMA converging at $17.86 and $17.39. The company is still more than 20% undervalued, so I would stick with this position.
I've left some of the levels in the table below blank. In the case of Google, the company hasn't been public long enough to have long-term calculations. The lack of value levels elsewhere indicates that I don't know how low these companies can trade on their current weakness. As you know, in recent years, Internet stocks have quickly gone from parabolic patterns to falling knives.
Richard Suttmeier is president of Global Market Consultants, Ltd., chief market strategist for Joseph Stevens & Co., a full service brokerage firm located in Lower Manhattan, and the author of
newsletter. At the time of publication, he had no positions in any of the securities mentioned in this column, but holdings can change at any time. Early in his career, Suttmeier became the first U.S. Treasury bond trader at Bache. He later began the government bond division at L. F. Rothschild. Suttmeier went on to form Global Market Consultants as an independent third-party research provider, producing reports covering the technicals of the U.S. capital markets. He also has been U.S. Treasury strategist for Smith Barney and chief financial strategist for William R. Hough. Suttmeier holds a bachelor's degree from the Georgia Institute of Technology and a master's degree from Polytechnic University. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback --
to send him an email.