As the year draws to a close, the major tech stocks - IBM, Apple, Google and Microsoft - made headlines this year, all for different reasons. Three of the companies have outperformed the broader market, represented by the S&P 500 SPDR (NYSE:SPY) ETF which is down 0.52% YTD, and one of these tech giants has not. Heading into next year, let's take a look at how the charts are setting up, and which of the mega-caps is worth owning going forward.

International Business Machines (NYSE:IBM) has so far been the star performer of the mega-capitalization technology stocks. Up 25.27% YTD to $184.75, from $147.48, the stock has been well-supported throughout the year by its 200-day moving average. With on-balance volume rising and a steady trend higher in the price, if the price continues to push above the 50-day moving average it will be a 'buy' signal. Stop loss orders can be placed near the 200-day moving average or around $175, which is just below the recent swing lows. A push above the 50-day moving average is likely to trigger a re-test of the recent high at $194.90, and if that is exceeded, the target is $210.

Apple (Nasdaq:AAPL) has the largest capitalization of the technology stocks and has had a solid year so far, up 22.38% to $403.33, from $329.57. The stock is currently climbing higher after a fall from the October high at $426.7. The next resistance area is $410, and if cleared, it sets up a likely retest of the October high. A move above the high provides a profit target of $450. From August through December, the stock was well-supported above $353; therefore, a drop below this is bearish. The long-term upward trendline that began in early 2009 currently intersects at $363 (close to 200-day moving average) and should also be watched, as a drop below could trigger selling. Declining and diverging on-balance volume is signaling underlying weakness. (For more, see What does it mean to use technical divergence in trading?)

Google (Nasdaq:GOOG) has managed to eke out a small gain this year, outperforming the broader market. The stock is up 4.76% YTD to $633.14 from $604.35. It has been a volatile year for Google, with the price of the stock moving $169.94 – only to end up nearly flat for the year. That volatility could bode well for the stock now, though. If the January high of $642.96 can be exceeded, the stock could move aggressively higher, challenging the $716 resistance level seen back in late 2007. On the other hand, a drop back below $610 is likely to be short-term bearish. Further support is at the 200-day moving average and longer-term upward sloping trendline support is just below $500. (For more, see Support & Resistance Basics.)

Microsoft (Nasdaq:MSFT) has been the underperformer of the group, down 6.97% to $26.03, from $27.98. The stock had been moving within a tighter and tighter range throughout the year, creating a symmetric triangle chart pattern that extends back into mid-2010. The breakout of the triangle could largely impact the long-term direction of the stock. A rise above $27 will break the pattern to the upside, providing a long-term target of $36. There is significant resistance between the breakout price and $31.58 (2010 high) though, and should be noted. On the other hand, a drop below $24 is long-term bearish, as the pattern would break to the downside, providing a target of $15. The downtrend in the on-balance volume indicator points to declining buying interest in the stock. If a breakout of the pattern occurs, stop loss orders can be placed just outside the pattern on the opposite side of the breakout. This is currently about a $2 risk per share.

The Bottom Line
International Business Machines and Apple have had a great year, Google has outperformed the market and Microsoft has been the laggard. These stocks each present unique opportunities going forward, as the chart of each company sets up very differently. There is potential upside in these stocks if the price can push through resistance or create an upside chart pattern breakout, but the support levels must also be watched. There are warning signals present in some of these stocks and a breach of support means more selling could occur. IBM is setting up well, and Google has potential if it can break through resistance. Apple is more neutral, but it looks good if it can clear resistance, and the long-term direction of Microsoft will likely be largely swayed by the triangle breakout direction. (For more, see Analyzing Chart Patterns.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Chart Advisor

    Pay Attention To These Stock Patterns Playing Out

    The stocks are all moving different types of patterns. A breakout could signal a major price move in the trending direction, or it could reverse the trend.
  2. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  3. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  4. Technical Indicators

    Using Pivot Points For Predictions

    Learn one of the most common methods of finding support and resistance levels.
  5. Mutual Funds & ETFs

    Buying Vanguard Mutual Funds Vs. ETFs

    Learn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
  6. Mutual Funds & ETFs

    ETFs Vs. Mutual Funds: Choosing For Your Retirement

    Learn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
  7. Mutual Funds & ETFs

    How to Reinvest Dividends from ETFs

    Learn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
  8. Chart Advisor

    Watch These Stocks for Breakouts

    These four stocks are moving within price patterns of various size, shape and duration, and are worth watching for a breakout
  9. Mutual Funds & ETFs

    Best 3 Vanguard Funds that Track the Top 500 Companies

    Discover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
  10. Forex Fundamentals

    How to Buy Chinese Yuan

    Discover the different options that are available to investors who want to obtain exposure to the Chinese yuan, including ETFs and ETNs.
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>

You May Also Like

Trading Center