Is The Tech Sector About To Crash Back To Reality ?

When you’ve got the likes on NFLX and AMZN trading at Zillion times their P/E multiple, you know that we are trading in a market that doesn’t give a FUCK about fundamentals or technicals. That said, on a long enough timeline, Fundamentals do matter; and it is these same fundamentals that are about to pop the bubble of the BTFD (Buy-The-Fucking-Dip) investors, who get their trading ideas from the Hot-Dog vendor @ 42nd Street, who also has his own reality show on CNBC, titled ‘Mad Money with Jim Cramer’.

Tech stocks are OVERVALUED/OVERBOUGHT. Period. And even though I don’t think we’ll get a repeat of the Dotcom Bubble crash, at least not yet, I do believe that a 10+ Percent Correction in tech stocks is a legitimate possibility.

Here is a daily chart of XLK (Tech Sector ETF):

XLK - Daily Chart
XLK - Daily Chart

Recommendation: SELL

Price Target: $28

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  • Sandeep

    What are your views about CRM, AMZN and NFLX. Do you believe it is better to buy out of money puts on these equities with 3 month expiry ? or just short XLK ?
    I also believe that this PE>100 business should stop for companies as old as Amazon, but I have booked some losses in AMZN and CRM while trying to be a contrarion in last 2 years :)

    • wallstreetfool

      Hi Sandeep, I recommend you not let your Bearish or Bullish Bias on these stocks cloud your judgement. Be neutral and go with the flow. Eventually these stock will get pummeled and become the fallen ones; but until then, the bias, given the artificial markets we trade in, is Bullish.