Despite falling after the open, stocks could very well continue higher this week, and I’m finding many attractive setups in the technology sector. Indeed, some blue-chip tech stocks have been coiling and now appear ready to pop. Today, we’ll breakdown three candidates that are top picks for buyers.
Last week’s test of overhead resistance for the broad market was telling. Ever since the early-October beatdown in the S&P 500, the 2800 level has acted as an impenetrable ceiling halting multiple recovery attempts. But last week’s test appears altogether different. Rather than a vicious rejection, prices are absorbing overhead supply like a champ. Sellers have proven powerless to reverse this year’s rally.
And that has me thinking a breakout is inevitable. While some blue-chip stocks remain extended, others entered pausing patterns weeks ago and are thus providing clear low-risk entries.
Here are three of the best.
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3 Large Cap Tech Stocks Springing Higher: Apple (AAPL)
Click to Enlarge Source: ThinkorSwim
Apple (NASDAQ:AAPL) tops our list with a gorgeous consolidation pattern. Ever since the post-earnings pole vault that propelled the tech titan back into an uptrend, selling pressure has been virtually nonexistent. The multi-week pause settling on the stock has created a shallow cup-and-handle pattern that is now on the cusp of completion.
The next resistance zone isn’t until $185 to $191, so AAPL stock has plenty of room to run as well. Additionally, the rising 20-day and now 50-day moving average officially confirm buyers have wrested back control of the short-term and intermediate-term trends.
Buy the May $175/$185 bull call spread for $4.50. The risk is $4.50 and will be lost if AAPL sits below $175 at expiration. The max reward of $5.50 will be captured if the stock can climb above $185 by expiration.
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3 Large Cap Tech Stocks Springing Higher: Amazon (AMZN)
Click to Enlarge Source: ThinkorSwim
Amazon (NASDAQ:AMZN) shares have been uncharacteristically quiet for the past two months. But if Friday’s action is any indication, the online retail giant is awakening from its slumber. Volatility for stock prices tends to alternate between periods of expansion and contraction. This is where the coiled spring reference comes in.
I view the narrow consolidation as a coiled spring that carries pent-up energy that will soon be released once AMZN stock finally figures out which way it wants to break out. Given the healthy market backdrop and strength of the technology sector, I think we can all agree the likely direction of the break is higher.
Friday’s high volume pop is providing confirmation.
To bank on more upside, consider buying bull call spreads which offer defined risk bet. Buy the May $1700/$1750 bull call spread for $23.80. The risk is capped at $23.80, and the potential reward is $26.20.
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3 Large Cap Tech Stocks Springing Higher: Alphabet (GOOGL)
Click to Enlarge Source: ThinkorSwim
Alphabet (NASDAQ:GOOGL) rounds out today’s selections with a chart just begging to break out. Some would say Friday’s rally already confirmed it.
Though choppy, the action in Alphabet stock over the past five months has created a rounded bottom. The transition from lower swing lows to higher swing lows reveals the shift in control from sellers to buyers.
As the right side of the bottom has formed, distribution days have disappeared, and moving averages have reversed higher. Friday’s pop vaulted GOOGL stock above its 200-day moving average and completed a mini-symmetrical triangle pattern.
If you think the recovery continues, then buy the May $1160/$1180 bull call spread for $10. The risk and reward are both $10.
As of this writing, Tyler Craig held bullish positions in AMZN. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against
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