The technology sector is heating up. Friday’s breakout pushed the Nasdaq-100 to a new record high on the back of strength from the semiconductor industry. Today, we’ll breakdown three tech stocks to buy if you want to capitalize on further gains.
I’m particularly impressed by the performance of chipmakers. The industry broke to new highs Friday alongside the Nasdaq, led by a rip-roaring rally from Intel (NASDAQ:). Other names like Lam Research (NASDAQ:) and Applied Materials (NASDAQ:) scored breakouts of their own.
But it’s not just the behavior of the winners that bolsters the bull case. It’s also the action in the losers. Take Amazon (NASDAQ:), for instance. Thursday night, after reporting dismal earnings, AMZN stock was getting crushed. But once the opening bell rang on Friday, buyers swarmed with a vengeance, sending shares almost back to unchanged levels by day’s end.
In sum, the strength in tech offers compelling opportunities for bulls. Let’s take a closer look at three tech stocks to buy.
Stocks to Buy After the Nasdaq Breakout: Nasdaq ETF (QQQ)
The first name on this list isn’t a stock, but an exchange-traded fund. And the most obvious target in that space is the Nasdaq-100 ETF (NYSEARCA:). Instead of picking individual companies, hoping that they match or exceed the performance of the entire sector, why not just buy the index? It offers a diversified and straightforward path to profit from continued leadership.
This morning’s jump solidifies Friday’s breakout bid by pushing QQQ well into unseen territory. The past three months have formed an ascending triangle that is completed and confirmed by this breakout.
Implied volatility is trading at the lower end of its one-year range, making long option plays a cheap bet. Buy the Jan $197/$202 bull call spread for around $2.50.
Microsoft (NASDAQ:) has been one of the most consistent winners of the sector this year. Breakouts and pullbacks have all created profitable buying opportunities along the way. Its earnings announcement reaction last week was subdued, but the numbers were good enough to keep MSFT stock’s trend alive and kicking.
The past three months have seen a tight consolidation form that is breaking to the upside with this morning’s gap. It’s trading up 3% right out of the gate.
Like QQQ, MSFT options are cheap right now, making long call spreads a low-cost bet. If you think the stock powers higher into year-end, then buy the Jan $145/$150 bull call spread for around $2.20.
Friday’s powerful breakout in Intel after better-than-expected earnings demands its inclusion among key stocks to buy today. The chart is simply too pretty to pass up. Earnings announcements often set the tone for the quarter with poor performance weighing on stocks for months while great numbers buoy it up for the quarter.
While INTC stock may need some pause after Friday’s 8% rip, the downside should be limited in light of its strong fundamental backing right now. If we’re lucky enough to see a pullback in the coming days, then use it to deploy bullish trades like naked puts or long call spreads.
A break back below $53 would warrant reassessment. Barring that, the future looks excellent for INTC stock.
As of this writing, Tyler Craig held bullish positions in INTC. For a free trial to the best trading community on the planet and Tyler’s current home, !
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