Tech Stocks Alert: Software vs. Hardware
Markets are trending positively this month through a continued earnings deluge.
And tech stocks are squarely in focus right now as a number of big names report this week.
The direction tech stocks take this quarter is very important. As market leaders for the past few years, any significant dips could be a warning sign for stocks.
If tech stocks maintain their leadership position, there’s no reason not to believe the bull run is still alive and well.
Today we’ll unpack what’s transpired over the past week in tech by first breaking down the state of software stocks and then jumping right into hardware plays.
Your all-purpose tech stock alert is below…
Software Sells Off
The software sell-off is back in action as the tech sector comes off a choppy trading week last week.
The carnage continued well into Friday, dragging ServiceNow Inc. (NYSE: NOW) below critical support. The stock slipped toward six-month lows Friday, closing lower by more than 4%.
The financial media claimed “value concerns” are driving this sell-off. Of course, traders weren’t concerned about inflated multiples as the software stocks screamed higher earlier this year.
Is software as a group overvalued? Absolutely. But it took some serious corrections in the space for these concerns to surface.
While software names suffer, semiconductor stocks are hanging tough near their highs.
High-Flying Tech Stocks Are Back in Fashion
Thankfully, the slump we’re seeing in software stocks has yet to spread to other high-flying tech groups.
The VanEck Vectors Semiconductor ETF (NYSE: SMH) made a nice push to new all-time highs last week. The ETF surged into uncharted territory early last week and then retreated back toward its breakout zone.
While it would have been perfect to see some additional follow-through to the upside to get a stronger weekly candle, I’m fine with the potential for a little springboard action this week following some consolidation. With the software names struggling, we need the semis to shine this earnings season.
Remember, these stocks were heavily affected by trade war tensions. If the market can move beyond its political and economic worries, we should see some follow-through to the upside.
Nvidia Corp. (NASDAQ: NVDA) moved in lockstep with the rest of the semi sector on Friday but finished well off its lows.
That said, I expect a quick snapback toward $200 as we push through the trading week.
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Chief Technology Expert, Technology Profits Daily