Recent Tech Selling Signals Big Future Upside

In fact, MAPsignals data noted the most risk-off action in technology shares since the market lows in October. Using the quality-laden Technology Select Sector SPDR ETF (XLK) as a proxy, you can see the recent decline:

Tech selling of this magnitude is uncommon.

A big catalyst this time around was the earnings miss by software company Salesforce.com, Inc. (CRM), which had investors hitting the exits and driving the share price down.

The selling hit other tech firms too – 44 tech stocks were sold on May 30 (roughly 20% of our tech universe), the most since Oct. 26.

This might seem like a downer. But it’s actually good news because recent tech selling signals big future upside.

Let me show you what I mean.

Recent Tech Selling Signals Big Future Upside

Since 2013, when 44 or more stocks are sold, the XLK ETF soars afterward:

Even better, MAPsignals data can help pinpoint the downtrodden names. For example, CRM is a top-15 holding in XLK and it was slammed:

But its fundamental story is solid, especially sales and earnings growth:

• 3-year sales growth rate (+18.1%)
• 3-year EPS growth rate (+590.9%)
• Profit margin (+11.9%)

Source: FactSet

Similarly, software firm ServiceNow, Inc. (NOW), which is also an XLK top-15 holding, has been sold heavily lately:

But it too is a financial powerhouse:

• 3-year sales growth rate (+25.7%)
• 3-year EPS growth rate (+184.6%)
• Profit margin (+19.3%)

Source: FactSet

A Map to Spot Top Stocks on Sale

Understanding that, it’s clear this could be a “buy the dip” opportunity. That was a wise move in the past for tech stocks in general.

If you bought CRM when red signals showed up in 2022-23, you’d be doing well:

The same is true for NOW. Buying the red-barred dips in 2022-23 was a winning move:

The bottom line is these tech liquidations are uncommon. When they happen, jump in with both hands.

A great way to do that is by tracking institutional money flows – it reveals tomorrow’s winners. It helps to have a map to spot top stocks on sale.

If you’re a serious investor, Registered Investment Advisor (RIA), or a money manager looking for hedge-fund quality research, get started with a MAP PRO subscription today.

Disclosure: the author owns CRM in personal and managed accounts at the time of publication.