Techs on Sale: NVDA, TSLA, GOOG - Buy Now?
Bloodbath Wednesday.
24 July 2024 will go down US stock market history as one of the bloodiest trading day.
Most tech stocks took it on the chin as investors faced a reality check on their artificial intelligence (AI) bets after tech earnings.
By the time the 4:00pm clock chimed: (see above)
DJIA: -1.25% (-504.22 TO 39,853.87). Its fall has undercut the 40,000 level and 21-day moving average.
S&P 500: -2.31% (-128.61 TO 5,427.13). It has sunk -2.0% to just below its 50-day average, a first time in 354 trading sessions.
Nasdaq: -3.64% (-654.94 to 17,342.41). It’s worst day since October 2022.
Nasdaq’s “Accolades”:
Nasdaq, which has seen 27 record highs in 2024 so far, is still more than 500 points away from entering its own correction territory.
Although, Wednesday might be its biggest drop of the year, it’s already down -7% from its 10 Jul 2024 peak.
Just for the record, the largest peak to trough drop this year that it has to beat was -7.06% from April 11 to April 19.
Wednesday’s fall will be a big test for the market rally.
Opposing possibilities in the near terms:
The S&P 500 and Nasdaq could rebound from these levels. OR
Break lower in some form of intermediate correction, at least for techs.
Root Cause/s.
Wall Street has blamed both $Alphabet(GOOG)$ and $Tesla Motors(TSLA)$ catalyst for igniting the “crash”.
Big tech names collectively lost billions in market value after quarterly results from Alphabet and Tesla disappointed, kicking off the tech earnings season on a sour note.
Alphabet’s latest performance showed advertising growth is slowing and its stock fell -5% to $174.37 per share and is expected to consolidate further.
Tesla, offered a fourth straight quarter of disappointing earnings, leading to its massive -12.33% fall to $215.99 per share, making it the worst performer in the Nasdaq 100.
Similarly, it is expected to continue with its consolidation.
Wall Street’s bar for both of them was set high.
Alphabet’s stock was up +15% in the 3 months before earnings.
While Tesla rose a whopping +70.29%. This offered little margin of safety for anything uncertain and made big tech shares susceptible to profit-taking.
In my post dated 24 Jun 2024 (click here ! to read & re-post), I had warned about Tesla and its CEO. Post one month of my post, it happened.
Mag 7 : Re-stocktake.
While corrections aren’t always a bad thing and should be viewed as healthy adjustment after a period of significant gains, it remains a bitter pill to swallow especially when one is a “victim” of the plunge.
Although Tesla had the bigger quantum drop, Google had the bigger market impact.
This is because Google has a larger market cap.
More importantly, its results and guidance weighed on fellow megacaps, along with many other tech firms. (see above)
$Microsoft(MSFT)$ stock fell -3.6%, dipping below its 50-day moving average and undercut a prior buy point.
$NVIDIA Corp(NVDA)$ stock tumbled -6.8%, dropping its 50-day lines.
$Meta Platforms, Inc.(META)$ stock sold off -5.6%, encounter resistance at its 50-day moving average.
Amazon (AMZN) lost -3%, hitting resistance at its 50-day line on Tuesday.
Apple (AAPL) stock slumped -2.9%, falling below its 21-day moving average for the first time since 01 May 2024.
Collectively, the Magnificent Seven stocks lost -4.6% on Wednesday, their worst loss (as a group) since 13 Sep 2002.
Mag 7 - Support & Resistance.
With further corrections still on the card, it is timely to map out both revised Support and Resistance levels for these AI-laced Tech stocks; just in case there are investors out there, hoping to put Mr Buffett’s mantra to practise. (see below)
*Note : the different prices to the support & resistance levels are for reference only. Investors are expected to perform their due diligence, when it comes to investing your hard-earned monies.
My viewpoints: (mine only!)
Optimistically, the adage ‘one swallow does not make a summer’ feels appropriate for now, for investors.
Based on (a) inflation, (b) jobs and (c) economic reports out for the past few months, the economy is stablizing, implying yesterday’s incident isn’t the start a prolonged contraction. more a short-term correction,
Yes, past few trading sessions may rattle some nerves, it is important to keep things in perspective.
Firstly, Nasdaq is still up +15.5% YTD and is up > +110% in the last 5 years (+16% annualised).
One observation being played out is a squaring of (investor) positioning that had become too stretched.
Meaning, (1) most investors were (very) long “tech” because of the hype around AI, but also genuinely attractive earnings growth stories and (2) they had zero exposure to small caps because they had been underperforming for so long.
Excluding the outliers listed above, what is seen is a market move that is more reminiscent of a growth scare.
Now is a good time to buy ?
I don’t think so because of events on 24 July and also not ruling out further downsides.
Rather, the impact of yesterday would have been most extreme for those undiversified investors who were (unwisely) only exposed to Nasdaq.
In addition, there is investor opportunity somewhere: close to 25% of the components of the Nasdaq Composite were up yesterday.
Similarly, S&P 500 sectors such as utilities (+1.2%), healthcare (+0.8%) and energy (+0.2%) were all up yesterday.
Hopefully, Microsoft, Meta, Amazon and Apple who would be reporting their earnings would help to stem the tide.
Can always hope, right !
Before taking the plunge, I would recommend that you read what Goldman Sachs has to say about “Buying the Dip”. Click here ! to read and help to repost to help spread the knowledge.
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Do you think the Mag 7 will continue to consolidate this week ?
Do you think as investors we should heed the words of Goldman Sachs report ?
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Looking forward to the earnings next week
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