Although the market is currently volatile in the short term, the long-term trend of rising remains unchanged. Now is an excellent opportunity to position high-quality Technology stocks at a Low Stock Price.
Investors can take advantage of the current opportunity to buy quality stocks at cheaper prices and use some tools to help them buy shares at the right price.
The stock market is on an upward trend in the long term—this is an age-old story just like the stock market itself. If you zoom out and look at any major Index, you can see this.
Therefore, although the recent downturn in the market may seem volatile or astonishing, from a more macro perspective, these fluctuations are not that serious as long as there is time to wait for recovery. In fact, these moments create great buying opportunities, especially for high-quality Technology stocks that were previously overvalued. Since the beginning of this year, the S&P 500 Index (SPX) has dropped about 5.9%, while the Roundhill "Seven Giants" ETF (MAGS) has fallen approximately 15.9%—Technology investors can now seize this opportunity.
However, there are factors to consider when buying Technology stocks now: investors must take into account two macroeconomic risks. In the short term, the Trade war may directly impact companies that rely on Hardware sales. Meanwhile, if economic growth slows, it may also affect a wider range of businesses.
For investors who can accept these risks, the recent sell-off can be used to expand their preferred Technology stock portfolio that may currently be undervalued.
How to buy on dips while focusing on quality and valuation.
Despite the uncertainty, if looking for companies that can continue to innovate and advance their product cycles, selected opportunities can still be found. Neuberger Berman's Senior Research Analyst for Technology, Daniel Flax, stated that these companies are expected to become stronger after this period.
In particular, companies building AI and Cloud Computing infrastructure, such as NVIDIA (NVDA.O), Alphabet (GOOGL.O), and Microsoft (MSFT.O), are considered to be strong Stocks.
"They are not immune to cyclical headwinds," Flax stated, but these companies continue to innovate and invest in new technologies. "They are creating significant value for their clients, which can further create value for Shareholders over time."
Flax mentioned that compared to last year, he believes "despite potential changes in USA trade policy, those core Technology trends remain healthy and unchanged."
Ken Mahoney, CEO of Mahoney Asset Management, expressed that regardless of the market environment, investors should not simply go long or short but should maintain a sufficiently Neutral stance to respond flexibly. His point is that the current market volatility can be a friend or an enemy — it all depends on how one responds. For instance, investors can use some tools from traders to determine Buy Ranges.
One such tool is identifying the support and resistance levels of Stocks. Simply put, it involves observing the stock price chart to understand at what price points the stock typically bounces back or retreats. Regardless of whether the overall stock price is rising or falling, certain high and low Ranges will emerge during the process.
Mahoney cited Microsoft's example: in April, Microsoft’s stock price rebounded multiple times around $350. Although last Friday the stock was priced around $392, investors might consider placing a Buy order around $370 to buy when the price retraces from the current level. For those looking to further optimize, they might set partial Sell orders when the stock approaches resistance levels or exceeds $400. He stated this is one way to create "your own excess returns (alpha)."
"This year, investors need to engage more in this 'tactical buy on dips and sell on highs' strategy because we might end the year on a negative note," Mahoney added. "The only way to achieve returns is — not to turn everyone into day traders — but rather to operate more proactively, making volatility your ally."
Despite significant market volatility, Mahoney emphasized that investors still need to confirm that Stocks are in an upward trend. He recommended using the Simple Moving Average (SMA) to judge the overall trend of the stocks. For long-term investors, he recommended using the 200-day moving average (SMA200), which is the average of the closing prices of the stocks over the past 200 days. If the stock price falls below the 200-day moving average, one must be very cautious, as this often indicates that the trend may turn downward.
Traditional diversified investment usually occurs across asset classes, but it can also be conducted within technology stocks. Siebert's Chief Investment Officer Mark Malek stated that technology investors often become overly excited about a popular stock (like NVIDIA) — this strategy works well in a bull market, but can lead to problems in a volatile market. Increasing the allocation of lower volatility technology stocks can help smooth the overall portfolio risk. Malek pointed out that Microsoft is a good example, as its stock price is less volatile compared to other members of the "Seven Giants."
Investors can use a simple indicator to look for stocks with lower volatility, which is the Beta value. It measures a stock's volatility relative to the overall stock market: a value of 1 indicates volatility consistent with the market, above 1 indicates greater volatility, and below 1 indicates lower volatility. For example, according to FactSet data, NVIDIA's Beta value over the past 90 days has been 1.97, meaning it is highly volatile. In contrast, Microsoft's Beta value is 0.92, indicating that its volatility is lower than the overall market.
