To The Moon

Please find and follow my YT channel (nerdbull1669) for Daily SG and US Stock Watchlist.

Do follow me as I share quality stock pick for Daily Watchlist.

I was looking at the trends and technical analysis by the A.I., something interesting came up.

The market have been brought higher by Tech Stocks, which are mainly Mega cap tech companies. Their market capitalizations mostly exceed $500 billion.

Hesitancy detected within Tech Stocks

Over the last 2 weeks, we can see some stalled rallies and rather choppy price action.

Now this week, we have some bearish post-earnings reactions, from $Netflix(NFLX)$ which is part of FAANG. And the much talk about $Tesla Motors(TSLA)$ .

Their stock price reaction has make the observation worse.

Here is how the various tech stocks have performed over this week. Let’s look at FAANGs

If you look at how they have been trading for this week, there is a sign that they are trying for a rally, but it is rather stalled.

And you can see the price movement is choppy as well. This is why I believe hesitancy is seen in the FAANG stocks.

Moreover, investors are left disappointed as their expectation of Fed ending its monetary tightening is fading away.

The tech sector has also stop outperforming strongly because of earnings risk, unattractive valuations and relative high price if you look at it long-term. This has make analyst and strategists neutral in their move.

What happen when tech stocks dropped across the board

A significant drop in tech stocks prices could affect the markets greatly. In March, the 3.5% gain in S&P500 index, the tech sector was the key driver.

Despite there is concerns of a banking crisis in March, which is supposed to lead to a deep deterioration in growth.

Microsoft Corp., Apple Inc. and Nvidia Corp. were the biggest gainers in the benchmark index in March while banks were the ones who are lagging behind.

So a slump in Tech Stocks could bring the benchmark index down into a correction.

Why Invest Into Health Care Stocks

If we look at how health care stocks have performed, let us take a look at the MSCI data.

Healthcare Stocks Have Strong Profitability and Growth Features.

Source: MSCI

Most healthcare portfolio allocation will have Biotech as one of the larger component.

A word of caution is Biotech can be very volatile, so it is important to understand which stock we should select.

So to prevent us to select the wrong stock and companies, it would be better to find companies with high or improving returns on capital and strong reinvestment capabilities.

Summary

Tech stocks have been traditionally used as defensive stocks.

If we consider the economic climate now, with the unknown signal of Fed’s rate hike campaign direction, I feel that it would be better for us to look at Health Care stocks to be another leg of defense.

There are many health care stocks, so there are certain rules (or criteria) we can use to choose them.

I personally use the following :

1. Companies with high return

2. Companies who are reinvesting their profits smartly

3. Companies who make use of technologies to grow their product and service

There might be many factors which others follow, do share in the comments so that we can learn from each other.

Appreciate if you could share your thoughts in the comment section on what are your thoughts on tech stocks price movement this week as compared to interest into health care stocks?

Do like, share and comment on this article if you find this trading thought useful.

@TigerStars appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.