Two traders believe that technology stocks can still thrive despite rising rates.
Wednesday’s Federal Reserve statement stated that it will accelerate the withdrawal of its bond purchases to reduce inflation. It also forecasts three interest rate increases in 2022.
High-growth tech stocks tend not to outperform when rates rise, but a few may surprise to the upside in months ahead, Simpler Trading’s Danielle Shay said to CNBC’s “Trading Nation”.
The firm’s director for options stated that he is primarily focused on Microsoft and AMD. He also said that both have shown consistent quarter over quarter and year-over year growth, regardless of market conditions.
Shay said that while they can be volatile, especially AMD, the long-term trend is one of buyers coming in to these names, especially at key technical levels such as their 50-day moving Averages, which are close to where the stocks are trading.
“I believe they’re leaders, they’re strong businesses and it’s great place to purchase them right now.”
Quint Tatro, Joule Financial Chief Investor Officer, said that the snapback rally after the Fed meeting was not surprising.
He suggested that the Ark Innovation ETF(ARKK) be used for an end-of year trade. This fund is Cathie Wood’s popular, disruptive tech-focused fund.
“It has been completely demolished and I believe that there is a very good price point off of it.” [Tuesday’s]Tatro stated, “Lows that you can trade against into the end-of-the year for a pretty decent Santa rally.”
He acknowledged that ARKK might struggle in 2022 but said that ARKK’s 23.5% decline year-to-date sets it up to rebound into the end.
Intel was Tatro’s longer-term pick.
He said that Intel is a battered, stodgy technology company… with an amazing balance sheet, trading 13x next year’s earnings.” “What we love most is that they will unlock Mobileye’s value through an IPO. So they’re going really to shore up some additional capital through that. I think they’re well positioned to see the wind at their back as they come out this sort of semiconductor issue.
Disclosure: Tatro and Joule Financial own shares in the Ark Innovation ETF (ARKK), and Intel.