Upon running a screen for top performing tech stocks, I was left with 15 large and mega cap companies that had greater than 30% returns year to date (YTD). Narrowing it down to four to write about wasn't exactly easy. With major indexes, such as the S&P 500, continuing to be resilient in new all-time-high territory, a lot of charts are looking quite good for the bull case. Therefore, the four tech stocks below aren't necessarily the most high-flying of the bunch, but rather have good trade set-ups, risk can likely be controlled, a profit target is established, and a possible entry point is close at hand.
Applied Materials (Nasdaq:AMAT) has been surging higher since November 2012. Back then it was near $10; now it's approaching $15. After a strong wave higher in April, the stock has consolidated between $15.18 and $14.32 (unadjusted) in May. An upside breakout of this consolidation provides a target of $16.25 to $16.75. Therefore, I like the long if the stock price moves above $15.18, with a stop just below $14.32. If the stock does manage to enter the $16.75 region, I expect to see some resistance there, as $16.93 is the 2011 high.
Fidelity National Information Services (NYSE:FIS) is moving relentlessly higher since the start of the year, up more than 30%. Pullbacks have been very short-lived and May has been no exception. May 21 saw a new high at $45.82, followed by a three-day pullback of less than 4%, and as of the May 28 high at $45.95, it looks like another wave higher could be underway. I like the long if the price continues to move above $46. The targets are $47.50 (close out part of position) and $49 with a stop-loss at $44.50. There is no immanent resistance, but the danger is that with such a steep ascent, a reversal could be even steeper.
Microsoft (Nasdaq:MSFT) is up almost 32% this year, and showing a similar pattern to Fidelity National. A brief pullback from the May 21 high at $35.27 has almost completely been recouped as the stock closed at $35.02 on May 28. A continued push above that high marks a potential entry into the next wave higher. Targets are $36.75 and $38.25 with a stop-loss just below $33.90. The 2007 high is at $37.50; therefore, we could see some additional volatility if the stock enters this area, both to the up or downside.
Seagate Technology (Nasdaq:STX) has more than quadrupled in price since 2011, and the stock continues to surge. The stock has created new highs on both May 23 and 28, showing the push still has steam. Waiting for a pullback is an option, as is getting in between $42.50 and $43, if possible. The downside risk can be controlled with a stop just below $39.90. One target is $46.50, although if it reaches that level using a trailing stop on any remaining position may capture additional upside.
The Bottom Line
In a strong market, look to buy strong stocks after brief pullbacks. Such moves provide easy-to-see entry points as the stock begins to rally again, and profits can often be nabbed at reasonable profit targets. The low of the pullback also provides a great level to place a stop. These trades are most likely suited to active swing traders, who are looking for trades, which last several days to a couple weeks.
Charts courtesy of stockcharts.com
At the time of writing, Cory Mitchell did not own any shares in any company mentioned in this article.