Buy Leading Tech Plays on Big Selloffs

The Nasdaq has started off the year with an un-seasonal decline, and one that’s leaving the index looking at a full-blown correction of 10 percent off the most recent highs.

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  • While the length and depth of any pullback is unknown, markets do tend to rebound in time—and tech-heavy stocks tend to be the fastest to start to move higher. Investors who embrace a “buy the dip” mentality towards key tech names can best take advantage of any inevitable market selloff.

    One such company that looks strong here is Zscaler (ZS). The tech infrastructure play which offers software-as-a-service scored a key upgrade, as the company looks like a continued winner no matter what happens in the market for tech stocks in the short-term.

    Shares have performed about in-line with the overall market in the past year. But with revenues up nearly 62 percent in that timeframe, chances are the company will continue to grow no matter what the market does.

    Action to take: Shares are about one-third off their 52-week high, but are starting to move higher again. Investors may want to go along for the ride, given the company’s long-term potential. Shares are unlikely to pay a dividend anytime soon, but by the time it does, the company will sport a far-higher market cap.

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  • For traders, this looks like a classic market rebound play in the making. The July $300 calls, last going for about $22, look like a way to leverage a rebound in the coming weeks. Traders can likely nab mid double-digit gains on the option while putting up less capital than buying shares outright.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.