Some big techs at key levels


This post is for education purposes only and should not be interpreted as a trade recommendation. Options trading may not be suitable for all investors.

The February-March volatility swoon planted some top stocks at key levels. Traders might want to keep an eye on these companies, regardless of which way the market goes. They could be major beneficiaries if the S&P 500 bounces, but also big losers if it breaks down. Fortunately their moves could be leveraged with calls and puts because they all trade a lot of options.

Netflix (NFLX) tops the list. It’s the best-performing member of the S&P 500 this year aside from XL Group (XL), which is getting acquired. Runaway subscriber growth kept the stock climbing to new highs as recently as early March. That stands in sharp contrast with other big techs like Alphabet (GOOGL), Apple (AAPL) and Facebook (FB), which remain mired below their levels at the start of 2018.

NFLX is now holding both its 50-day moving average and its late-January high around $280. Earnings are due the afternoon of Monday, April 16. On another interesting note, S&P Global Ratings said it may upgrade the company’s B+ credit rating thanks to its strong market position. Credit analysts don’t opine often in the tech space, so it’s worth paying attention when they speak.

Netflix (NFLX) chart w/50-day MA and old high marked.

Micron (MU) also screamed to new highs last month. The memory-chip maker raised its guidance in February and then reported better-than-expected earnings in March. It’s one of the few ways for investors to play the wave of strong demand for DRAM and NAND circuits that are becoming ubiquitous as smart phones, data centers and robotics continue to grow. For now, that’s helped the company keep prices high.

MU is slightly above its 50-day moving average, but is holding its old $50 high from November. That’s another interesting setup technically.

Micron (MU) chart w/ 50-day MA marked

Lam Research (LRCX) supplies equipment to the semiconductor industry. The company is riding similar tailwinds as MU, but has pulled back more deeply. It’s sitting at both its 50- and 100-day moving averages — plus an old peak from February around $195. LRCX also reports earnings on April 17, but often trades an sympathy with the broader semiconductor group. So, buyers may want to step in around these levels if sentiment turns bullish. However if the bears win, traders may look for a retest back toward at least the February lows near $160.

Lam Research (LRCX), with 50- and 100-day MAs marked.

This post is for education purposes only and should not be interpreted as a trade recommendation. Options trading may not be suitable for all investors.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.