(This commentary originally appeared on Friday on Real Money Pro. Click here to learn about this dynamic market information service for active traders.)
It’s been a rough week for the tech bulls. Big wins can lead to big pullbacks, as we’ve seen the last few days, and don’t we all wish we’d bought stocks at lower prices? Now we just might get our chance, but what price is the right price?
For a little perspective, I’ve pulled up the weekly charts of some of the biggest names in tech. Basically, I’ve created a “dream” shopping list using bull channels. Channels are created using bullish trend lines that stretch both below the lows and above the highs.
First up is Apple (AAPL) . If we draw a channel using this stock’s higher highs (HH) and higher lows (HL), we can visualize Apple falling from its most recent high toward its mean (blue dotted line). According to the chart, if the opportunity should arise, Apple’s mean — the center of its channel — would be around $130.
It is highly unlikely that Apple would reach the bottom of this very wide channel, but if it should, it would be a screaming buy. The bottom of the channel is about $105; this is what I’d call a “dream price” because it’s a price someone might dream of buying this stock.
Facebook (FB) is trending higher within a tighter channel, putting its mean at about $142. I really don’t feel that the stock is a tremendous bargain at that price, especially because I already picked up some Facebook earlier this week. Instead, I’ll opt to buy if and when Facebook reaches the bottom of its channel. That would make my dream price $130.
Alphabet (GOOGL) has a similar story to Facebook; this stock is already closing in on its mean, which is just below $950. The bottom of the channel provides the “dream entry” of $850, and I’d be very tempted to add more shares at that price.
Salesforce.com (CRM) is still fairly close to the top of its channel; a reversion to the mean would put this stock at about $80, which would be a great price to buy. The “dream price” at the bottom of the channel is just under $70.
Let’s keep in mind, I’m not predicting these so-called dream prices will ever be reached. Indeed, a pretty severe selloff would need to occur in order to pull prices to these levels. Because I already am long all four stocks mentioned, a big pullback would be anything but a dream, but you’ve got to have a game plan just in case.