After November’s rally, December has started on a less cheerful note.
Last month saw many stocks surging higher, including Autodesk (NASDAQ: ADSK), Adobe (NASDAQ: ADBE), Advanced Micro Devices (NASDAQ: AMD), Target (NYSE: TGT), and Disney (NYSE: DIS), with these stocks rising 20%, 11%, 12%, 16%, and 14%, respectively.
But at the start of this month, each of these stocks are under pressure and two experts say two of these names could see some increased weakness in the near term.
According to Fairlead Strategies founder Katie Stockton, AMD has room to fall.
“AMD [cleared] its summertime highs and also long-term resistance from prior to that,” Stockton said. “The breakout saw great follow-through, ran up about 12% in November, and of course now there’s room to [fall to] support based on that breakpoint, which was roughly $34 to $35.”
To get back down to $34, AMD would see a decline of -14% from the price as of Wednesday’s close.
“A pullback to that support level would actually be welcome from a technical perspective and that would increase the risk-reward ratio following that breakout so I do think some of these stocks that have run up following breakouts are prone to pullbacks, more so than the broader market or major indices, but I would see them as opportunities to add exposure,” Stockton added.
Strategic Wealth Parterns’ Mark Tepper agreed with Stockton that AMD is due for a fall.
“The stock is up over 100% this year, trading at a forward [price-to-earnings ratio] of about 36, so it’s not cheap,” Tepper said. “And they’ve been doing a great job taking market share from Intel (NASDAQ: INTC), but… expectations are high. We should know by December 15 how this stock is going to end up for the year. If the trade war reescalates, all semis are going to take it on the chin, especially AMD which is a high beta semi.”
The other stock Tepper said could see stage a substantial pullback? Autodesk.
The design-software company posted an earnings beat last week, posting Q3 revenue of $843 million, up 28% year-over-year. But while the stock is up just over 37% year-to-date, Tepper says slowing global growth could send shares lower.
“[Autodesk is] trading in a really high multiple because sentiment generally has been pretty positive, but it’s also a stock that’s highly correlated to architecture and construction,” Tepper said. “So if those things start to look ugly, or the global economy looks to be weakening, the multiple is going to pull back.”