Five Failed Tech Breakouts Highlight Risks – Investor's Business Daily

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Futures for the S&P 500 index, Nasdaq 100 and Dow Jones industrial average rose early Friday after major averages sold off Thursday morning but closed with modest losses.

But it’s still a choppy market, and that makes breakouts more apt to fail. Apple (AAPL) chipmakers Texas Instruments (TXN), Analog Devices (ADI) and Cirrus Logic (CRUS), along with NetEase (NTES) and Ciena (CIEN) have all seen their breakouts fail in recent days.

XAutoplay: On | Off During Thursday’s session, the Nasdaq composite closed down 0.5% after losing 1.4% intraday but finding support at the 50-day line. The S&P 500 index finished off 0.2% and the Dow industrials 0.1%.


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Apple Chipmakers

Analog Devices broke out of a cup base on May 30. The next day, Analog Devices reported strong earnings, and shares sprinted almost 7% soon after the open to 90.49. But Analog pulled all the way back to 85.76 by the close. In the next three sessions, Analog plunged through its buy point and then its 50-day moving average. Since then shares have been up and down, though they are currently just above their 50-day line.

Texas Instruments tried several times to clear an 82.54 buy point, finally appearing to do so last week. But the stock plunged 4.1% last Friday. This week, TI is down 1%, moving below its 50-day line. While Texas Instruments hasn’t fallen 7%-8% below the entry points, the technical action has not been encouraging.

Cirrus Logic initially cleared a cup-base entry on April 7, but moved in and out of a buy zone until after a May 18 rebound from the 50-day line. Cirrus Logic then steadily rose, even becoming extended in early June. But shares tumbled 5.4% on Friday and 4% on Monday, dropping below their buy point and the 50-day line. The stock is now 12% off its high, making that old entry point invalid.

The iPhone chipmakers’ stumbles come amid Apple’s own stock woes. Apple consolidated for several weeks, and appeared to be on its way toward sketching a short flat base. But shares crashed 3.9% last Friday. This week, the stock has fallen more than 3%. And unlike many leading techs, Apple hasn’t found support at its 50-day moving average.

NetEase

The Chinese mobile-gaming platform broke out of a cup-with-handle base on June 5. NetEase was clearing a late-stage base, which is more likely fail. Still, shares extended gains the next session. But after hitting an all-time intraday high on June 7, shares began to reverse hard, falling below the entry area on Tuesday and continuing to fall. The depth of NetEase’s decline from the high and the buy point both make the old buy point invalid

NetEase’s retreat came amid a pull-back by many Chinese internet giants. YY (YY), a live group video-chat player, saw its own late-May breakout trigger a sell signal Thursday.

Ciena

The fiber-optic gear giant gapped out of a cup base on June 1 on earnings, soaring 16% to 27.19, just above a 26.94 buy point. But two sessions later, Ciena was below the entry, and shares have now fallen far enough to make the buy point invalid.

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