By Al Root

The Magnificent Seven stocks have lost their magnificence -- and it may not be restored anytime soon.

None of the Mag Seven has performed well of late. Through Thursday trading, Tesla stock had tumbled 45% from its 52-week closing high of about $480, while Apple, Amazon.com, Alphabet, Meta Platforms, Microsoft, and Nvidia are off an average of 16% from their own peaks. Fears include a slowing economy due to uncertain U.S. trade policies, Chinese artificial-intelligence competition, and, in the case of Tesla, the impact of CEO Elon Musk's political activity on auto sales. It's ugly, and it can feel like there's no end in sight.

Anyone familiar with technical analysis, however, knows that there is always a bottom; it's just a question of how far a stock has to fall to reach it. Technicians use price charts to determine where investors may decide to buy or sell stocks. They look for support -- a level on the downside that could attract the optimists who want to bet on the stock rising -- and resistance -- where the skeptics could decide to sell -- for intimations of where shares could go next.

The 50-day and 200-day moving averages are considered particularly important. As their names suggest, they indicate the average of where the stock has traded over a period -- 50 days for shorter-term traders and 200 days for longer term investors.

The good news is that the Mag Seven stocks look due for a bounce, at least according to the charts. Most are close to their 200-day moving averages, which can act as a cushion for stocks, says Fairlead Strategies founder and market technician Katie Stockton. What's more, most of the seven appear oversold, which means shares have gone down a lot, and quickly, reflecting a lot of fear all at once.

But all Mag Seven stocks aren't created equal. Stockton is least fond of Apple and Microsoft, the two largest U.S. stocks by market value. Both have their critics. The bears say Apple's iPhone 16 isn't driving more users to upgrade, while Microsoft's cloud growth has decelerated. But both have held up pretty well. At a recent $235, Apple is down 9% from its all-time high. At $397, Microsoft is off 15%. Neither stock looks ready for a big bounce, says Stockton.

She observes that Apple isn't as oversold as the rest and Microsoft is below its 200-day moving average. Both look range-bound. Apple will likely trade between $220 and $250. Microsoft's range looks to be $390 to $440.

Like Microsoft, Nvidia's stock is also trading below its 200-day moving average, but it has also fallen further from its 52-week high -- it's down 26% -- and has the potential for a bigger bounce, of, say, 20%. It also has a catalyst, with its GTC conference set to begin on March 17. If CEO Jensen Huang can work his magic, maybe that bounce happens sooner rather than later. It's likely to be just a bounce, however. Nvidia will likely be range-bound for a while, Stockton says, after posting gains of 240% and 170% in 2023 and 2024, respectively.

Alphabet is sitting just below its 200-day moving average after dropping 15%, while Amazon is sitting right on it after falling 17%. Like Microsoft, both have been weighed down by decelerating cloud growth. The stocks, however, could be poised to gain about 10% to close the gap with their 50-day moving averages.

Tesla, the hardest hit of the group, may be the most tempting, Stockton says. Shares have tumbled just below their 200-day moving average but, at $263, are more than $100 below their 50-day moving average. Of the septet, Tesla has the largest gap, by far, between its two moving averages -- and the most room to bounce if investors' fears subside.

There are reasons Tesla stock is oversold and looking for a bounce. Early 2025 sales data from around the globe show year-over-year declines even as investors are still expecting growth. Weak numbers are feeding fears that CEO Elon Musk's political activities are impacting Tesla's brand and turning off core buyers -- politically left-leaning people looking to go green.

While Tesla might be the most intriguing, Stockton's favorite is Meta Platforms. At $628, Meta stock is down 15% from its 52-week high and still well above its 200-day moving average. It has other support near $630, while the charts point to possible advances to $750 or $930 in the year to come. "It's stronger from a long-term technical perspective," she says.

The charts also contain a warning for investors. If there's a running theme, it's that the Mag Seven stocks, for the most part, look like they are range-bound even if they do bounce back soon. After two years of stock market leadership -- and big gains -- Stockton expects a period of consolidation, where shares flatten out for a while. "It's tough to make a [technical] case for any of these for [the] long term," says Stockton.

That might be tough for investors to swallow after the average Mag Seven stock gained an average of 110% in 2023 and 60% in 2024. For now, trading in a range could be the best-case scenario.

While Stockton isn't making a fundamental call on any of the stocks, fundamentally minded investors shouldn't be too quick to dismiss the chart patterns, which reflect all the sentiment and news at any given moment. "You never abandon a chart," says Stockton.

And in market seas as uncertain as these, the chart might be the best map we have.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 07, 2025 09:54 ET (14:54 GMT)

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