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. Bonds & Fixed Income

    The Top 5 High Yield Bond Funds for 2016

    Learn about mutual funds and ETFs that invest in high-yield bonds. Read about the risks and rewards associated with investing in high-yield bonds.
  2. Chart Advisor

    Rare Earth Metals Continue To Struggle

    Rare earth metals are used in many of today's products and many investors are wondering if consumer demand is enough to offset the global economic slowdown. We'll take a look at how they are ...
  3. Mutual Funds & ETFs

    3 ETFs to Consider Before an Interest Rate Hike

    Learn about potential impacts of the Federal Reserve boosting interest rates and three ETFs that can help you capitalize on the perceived December increase.
  4. Mutual Funds & ETFs

    A Complete Guide to Tax Loss Harvesting With ETFs

    Using exchange-traded funds (ETFs) to harvest tax losses can be a smart way to maximize your portfolio's tax efficiency.
  5. Mutual Funds & ETFs

    Why ETFs Are a Smart Investment Choice for Millennials

    Exchange-traded funds offer an investment alternative to cost-conscious millennials who want to diversify their portfolios with less risk.
  6. Investing

    Asset Manager Ethics: Acting With Competence and Diligence

    Managers must make investment decisions based on their personal investment process, which in turn should be based on solid research and due diligence.
  7. Mutual Funds & ETFs

    Should Investors Take a BITE Out of This New ETF?

    ETF BITE offers a full menu of restaurants. Is now the right time to invest?
  8. Financial Advisors

    5 Things All Financial Advisors Should Know About ETFs

    Discover five things all financial advisors should know about ETFs, including when ETFs may be a better choice for your clients than mutual funds.
  9. Stock Analysis

    The Top 5 ETFs to Track the Nasdaq in 2016

    Check out five ETFs tracking the NASDAQ that investors should consider heading into 2016, including the famous PowerShares QQQ Trust.
  10. Chart Advisor

    2 Short-Term and 2 Longer-Term Trade Ideas

    Two shorter-term and two longer-term trade ideas to consider, based on trends and the possibility of a breakout.
  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