Technology stocks have fallen heavily in the US, with the sector down over 30%, and many household names have technically crashed since the start of this year.
Meta, or Facebook (NASDAQ:META) as we know it, is down over 60%, Netflix (NASDAQ:NFLX) is down over 50%, while Alphabet (NASDAQ:GOOGL), formally known as Google, and Amazon (NASDAQ:AMZN) are down over 30%, just to name a few.
The Australian technology sector has followed the US, down over 30% since January 1. Appen Ltd has fared the worst, down over 70%, Xero Ltd is down over 45% while Altium Limited (ASX:ALU) is down over 23% and Wisetech Global Ltd, which is faring the best, is down just under 3%. The question remains whether the fall in technology stocks is over or should investors brace for more downside.
After reaching an all-time high of 2,450 points in August 2021, the technology sector (XIJ) fell to a low of 1,242 points in June of this year. This represents an almost 50% fall over 10 months, which means investors have suffered heavy losses – although the news is not all bad. The XIJ has very strong support, just above 1,200 points, and so far it has continued to hold above this level.
As the XIJ is up over 4% in October, it is possible that the Information Technology sector is turning a corner and will be more bullish moving forward.
While it is time to start looking at stocks in this sector, I recommend investors be very selective because while the sector as a whole may start to move up, there may still be some downside for a number of stocks before they turn to rise.
My picks for stocks to watch include Altium, Wisetech and Xero.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the bestselling and award winning book Accelerate YourWealth – It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au