Stocktake: Tech stocks still look extended after correction

Both bulls and bears can use recent stats to support their investing theses

 Tesla head Elon Musk. The company lost a third of its value in a week, but still the stock remained above its 50-day moving average. Photograph: Maja Hitij/Getty

Tesla head Elon Musk. The company lost a third of its value in a week, but still the stock remained above its 50-day moving average. Photograph: Maja Hitij/Getty

 

When is a correction not a correction? When is a bear market not a bear market? It’s often said a correction represents a fall of 10 per cent; a bear market, 20 per cent. However, given how extended some technology stocks got recently, those terms aren’t helpful right now.

Tesla, for example, lost a third of its value in a week; that sounds like a serious crash, but the stock remained above its 50-day moving average. Zoom lost more than a quarter of its value but didn’t even come close to breaching its 50-day average. Apple lost a fifth of its value, losing more than $400 billion in market capitalisation in the process; nevertheless, that merely brought the stock, which remained above its 50-day average, back to where it was trading in most of August.

The Nasdaq 100 also closed above its 50-day average, despite falling 10 per cent in just three trading days. The stats reflect just how technically overbought tech stocks had become. That aside, both bulls and bears can use the data to support their investing theses. Bears can argue any sell-off has further to go and that speculative excess is still embedded in market prices; bulls can argue the uptrend remains intact and that this is no more than a routine pull-back in an ongoing rally.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.