3 Sinking Tech Stocks to Avoid

3 Sinking Tech Stocks to Avoid

Posted On January 19, 2021 2:24 pm

The past few weeks have seen tech stocks fall by the wayside. Traders have left the sector searching for bigger gains in SPACs, financials, energy and small-caps. It’s a rotation born of rampant speculation that is arguably getting a touch out of hand. But good luck timing when the party ends. There are numerous takeaways to the growing performance disparity, but there’s one that’s most relevant to today’s gallery. Tech stocks are underperforming, and many should be avoided altogether.

Many have fallen from their highs. Some are even in downtrends. Given the technical deterioration and bounty of beautiful opportunities elsewhere, I think the entire sector is worth avoiding. At a minimum, a select few companies are fragile and should be avoided until we see at least some semblance of strength return.

With that said, here are three stocks that are under pressure:

  • Salesforce.com (NYSE:CRM)
  • Facebook (NASDAQ:FB)
  • Twitter (NYSE:TWTR)

Let’s take a closer look at their charts.

3 Sinking Tech Stocks to Avoid: Salesforce.com (CRM)

Salesforce.com (CRM) stock with downtrend

Source: The thinkorswim® platform from TD Ameritrade

Ever since Salesforce.com exploded higher following its late-August earnings announcement, sellers have been in complete control. Its drawdown has now eclipsed -24%.

The daily trend is stuck beneath a falling 50-day and 20-day moving average. We’ve seen multiple rally attempts along the way, but each was ultimately rejected.

We could see buyers gain some traction at the rising 200-day moving average, which is fast approaching, but I want to see a more substantial trend reversal before bottom fishing. For now, avoid the stock. If you think the bearishness continues, here’s a trade to capitalize.

The Trade: Buy the Mar $210/$200 bear put for $3.90.

Facebook (FB)

Facebook (FB) stock with daily downtrend

Source: The thinkorswim® platform from TD Ameritrade

In fairness to Facebook’s inclusion today, mega-cap tech stocks lost their mojo a couple of months ago. However, while the likes of Apple, Amazon, and Nvidia are at least treading water, FB stock has been rolling over. Ironically, its price is ramping on Friday while the rest of the market is sliding. I’m not buying the rare sign of strength, however.

The overall downtrend doesn’t allow it. Four of the past five down days also saw…

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