The top tech stocks like Nvidia (NASDAQ:NVDA), Meta (NASDAQ:META) and others have led the market higher. Not just other tech sectors and industries, but the market as a whole. So far this year, the Nasdaq is up 34.5% while the S&P 500 is up almost 19%.
Known as “relative strength” stocks, investors keep circling back to tech as a way to generate portfolio alpha vs. the overall market. It’s a stock picker’s market, and even though the rally has been broadening out to include other industries and sectors, tech remains red hot.
For good reason, it’s got investors looking for the best tech stocks to buy pre-breakout.
Can these names continue to charge higher or will momentum finally waver? Unfortunately, even when stocks look tired and need to consolidate, no one knows when the uptrend will actually end. The more that investors doubt the rally, the more likely it is to continue higher.
With that in mind, let’s look at a few top tech stocks from a technical analysis perspective.
Top Tech Stocks: Alphabet (GOOGL, GOOG)
Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) just reported earnings on Tuesday July 25, beating on analysts’ top- and bottom-line expectations. An earnings and revenue beat is important — provided that the company also tells a good story.
At a time where other stocks are not reacting well to earnings — including Tesla (NASDAQ:TSLA), Snap (NYSE:SNAP), Microsoft (NASDAQ:MSFT) and Netflix (NASDAQ:NFLX) — Alphabet is trading well on its results.
Not only is that a bullish catalyst, but it’s also a potential bearish landmine that’s out of the way. Now the stock is trying to close over the June high and the second-quarter high of $129.04. If it can do so, it creates a monthly-up and quarterly-up rotation, helping to open the door to the upper $130s, then potentially the $150 level.
For what it’s worth, Alphabet was the worst-performing FAANG stock of the year. Now earnings have vaulted it higher, while Netflix has fallen hard after its results, making Alphabet the second worst-performing FAANG component of 2023.
Could this kickstart a catch-up trade?
Best Tech Stocks to Buy Pre-Breakout: DigitalOcean (DOCN)
DigitalOcean (NASDAQ:DOCN) jumped on the AI bandwagon a few weeks ago, following its acquisition of Paperspace, an “AI-focused cloud computing startup”. The move vaulted the stock into a new wave of momentum, which is rare for the acquiring company.
Even before the deal though, DOCN stock was trading much better. Shares were up more than 55% ahead of the news and are currently up over 85% as we speak.
While management has made the decision to put more focus on its bottom line, DigitalOcean continues to grow at an impressive clip. Forecasts call for 22% revenue growth this year and almost 18% growth in fiscal 2024. However, the focus on the bottom line is important in an uncertain environment.
As for the charts, keep an eye on the $47.25 area. That’s the Q2 high and a clear breakout point on the chart. On July 25, DOCN did a good job holding this level as support, but it was under pressure again on the 26th. That may set up a deeper correction, potentially down to the $44 to $45 zone.
If that’s the case, keep watching for a potential breakout back over that $47.25 area. That opens the door back up toward $50, then hopefully, $53-plus.
AI Stocks Not Done Going Higher?: C3.ai (AI)
Last but not least, we have a true AI stock on our hands with C3.ai (NYSE:AI). This has been one of the top tech stocks of 2023, with shares up more than 250% for the year. Shares are up about 140% from the low in early May.
While the stock did not have a great reaction to earnings the way investors had been hoping — expectations for guidance were quite high after Nvidia reported its robust results — C3.ai has found its stride.
The company reported near the end of May, so it will be a little while before we hear from it again. Still, after a post-earnings dip, the stock was able to find its footing and resume the upside move. Eventually it took out the pre-earnings high and nearly traded up to $49.
From here, let’s see if this tightening wedge pattern can resolve higher. A lot of eyes have been on this one over the last few days, waiting to see if it can clear the $42 to $42.50 zone. Above last week’s high at $43.08, then C3.ai could really take off.
On the date of publication, Bret Kenwell held a long position in DOCN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
