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Rotation, Rotation, Rotation: Value Is The New Tech

Elizabeth Balboa

Tech just got wrecked, said Benzinga PreMarket Prep co-host Dennis Dick.

Apple Inc. (NASDAQ: AAPL) “got hit hard.”

NVIDIA Corporation (NASDAQ: NVDA), Amazon.com, Inc. (NASDAQ: AMZN), Applied Materials, Inc. (NASDAQ: AMAT) and Micron Technology, Inc. (NASDAQ: MU) — “annihilated.”

Western Digital Corp (NASDAQ: WDC) lost 16 percent over the last eight trading sessions, and Square Inc (NYSE: SQ), after a 264-percent run, conceded 24 percent.

Semiconductors are selling off, and HubSpot Inc (NYSE: HUBS) even earned a Citron short report on its sudden fade.

“This is rotation station we are in right now and tech is out of favor and value is back in favor,” Dick said.

Who’s Sitting Pretty?

As tech falls, the once-forsaken shares of Gap Inc (NYSE: GPS), Macy’s Inc (NYSE: M), L Brands Inc (NYSE: LB), Costco Wholesale Corporation (NASDAQ: COST) and AT&T Inc. (NYSE: T) are surging.

“They like those no-growth stocks right now, and that’s what the money is all flying into,” Dick said. “Long-term, I don’t think this makes a hell of a lot of sense, but short-term, that’s the trade.”

For now, SPDR S&P Retail (ETF) (NYSE: XRT) and Financial Select Sector SPDR Fund (NYSE: XLF) investors can enjoy more than 6.5-percent five-day gains bolstered by PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ: QQQ)’s 1.8-percent and Technology Select Sector SPDR Fund (NYSE: XLK)’s 2.7-percent concessions.

But they should always be ready to cash out, as the stocks plunge faster than they rise and risk getting stuck in a rut.

“They all end like this,” Dick said. “They come back after they break, and then it’s going to take some time. It’s got to form a base. Square is caught in a hard place right now. The momentum investors want nothing to do with it. The growth investors want nothing to do with it right now and the value investors like me say it’s too expensive. You need some consolidation, you need to hit a bottom, and then start to look like it’s going to go up again.”

How To Play It

So while value stocks are popping, Dick doesn’t see the trend lasting long.

“It is getting way overdone,” he said, noting that the stocks are low growth and not worth buying now. “If I had any of these in my investment portfolio, I would be ringing the register on these things right now.”

PreMarket Prep co-host Joel Elconin suggested parking the money pulled from tech plays.

“You park that money for a little bit, maybe sell some calls, finance, buy some puts with it, you try and go delta neutral like that and then you get this kind of rally and you get the principle appreciation,” Elconin said.

Related Links:

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Cramer's Guide To Profit From Market Rotations

PreMarket Prep is a daily trading ideas show hosted by former floor trader Joel Elconin and prop trader Dennis Dick. You can listen to the show live and participate in our chatroom every day from 8-9 a.m. ET here. The show is also available on YouTube Live. The podcast is available on iTunes, Soundcloud, and Stitcher.

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