It’s been an exceptional year for the S&P-500 (SPY), and several tech stocks have been brought along for the ride. While most of the performance in these names has been back-end weighted, Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA) are now beginning to flash short-term sell signals based on the velocity of their move higher. It’s quite rare for large-cap stocks to trade more than 35% above their 200-day moving averages, but are all currently sitting in this over-extended position. Fundamentally, their growth stories remain intact, but technically, risks are the highest they’ve been at any point in the past 12 months. Based on this, I see this as an opportune time to book some profits in Apple, Nvidia, and Tesla.

There’s little in common with an electric vehicle maker, the world’s largest smartphone and computer company, and a company that designs graphics processing units, but all three companies are displaying short-term sell signals as we head into year-end. These three companies are Apple, Nvidia, and Tesla, and all of them have gone too far too fast, with their velocity picking up even further through Q4. While some of the best trading mantras would suggest that the trend is your friend and to be right and sit tight, I would argue that the trend is your friend until it isn’t, and it’s essential to watch for inflection points. With Apple, Nvidia, and Tesla now all extended and beginning to flash sell signals, I believe the best of their runs are now over short-term (2-4 months).

(Source: TC2000.com)

While Apple continues to grow earnings at an exceptional pace, with a 10% growth rate in annual earnings per share [EPS] expected next year, I believe much of this is now baked into the stock. Even if the company can manage to beat FY-2020 estimates of $13.07, the stock is currently trading at 22x forward earnings, an exorbitant valuation for a low double-digit growth company. The fact that the stock is now 35% above its 200-day moving average and distribution days are beginning to show up (red bars), suggests that speed bumps are finally starting to show up as valuation gets stretched here. At this juncture, I would argue that any misses for Apple are going to have some nasty consequences, as the stock is now priced for perfection heading into the new year.

(Source: TC2000.com)

If we move over to Nvidia, analysts are expecting a massive jump in FY-2021 annual EPS, with current estimates for $7.14, a 30% jump from FY-2020 forecasts of $5.50. While this is an incredible growth and nice acceleration from the FY-2020 lull, I believe much of this forecast is already priced into Nvidia. Assuming the company hits the current FY-2021 estimates, Nvidia is currently trading at a forward earnings multiple of 34x, a very expensive valuation for a mega-cap. Any negative revisions heading into further quarters will not be kind to Nvidia, and I would argue the stock is beginning to get priced for perfection short-term as it heads toward $250.00.

As we can see in the above chart of Nvidia, the stock has put up two distribution days in the past week, with two weak closes from already quite extended levels. While this isn’t a death knell for the stock by any means, it does suggest that smart money is beginning to take some profits, and will likely continue to do so into further strength. Based on this, risks are certainly elevated for Nvidia here. It’s possible Nvidia could tag the $280.00 level in 2020, but I would argue that the next 10% move is likely lower.

Finally, moving over to battleground stock Tesla, the stock has shot up in near parabolic fashion the past month and is now up an incredible 80% for Q4. Tesla also has positive earnings revisions, with analysts tripping over each other to raise estimates on the stock recently. FY-2020 annual EPS is calling for $5.01, but this places the company at a forward earnings multiple of 85 at the current share price of $430.00. This is an extreme valuation for a company that has a nasty history of missing estimates and guidance, and I would argue that Tesla is now priced for perfection to a degree even more stretched than Apple or Nvidia. Tesla is also much more overbought than Apple and Nvidia and is in trouble if the company’s January earnings report doesn’t show a blow-out quarter.

As the below chart shows, Tesla is now 60% above its 200-day moving average, with three separate distribution days in a row, which suggests a more substantial skew towards retail vs. institutional buying pressure. While a move to $500.00 next year is certainly a possibility given the stock’s multi-year breakout, I believe the pain trade is to the downside as Tesla is now getting crowded on the bull side short-term here.

(Source: TC2000.com)

While investors are crawling over each other to get into these names, and analysts continue to revise targets higher, I believe the pain trade is lower for Apple, Tesla, and Nvidia. These mega-caps are up massively in Q4, and are heading into 2020 at the least attractive valuations in the past several years. Anything is possible, and these names could continue higher over the short-term, but I believe all three stocks are past their expiry date here short-term, and I would not be surprised at all by 12-15% corrections in each name.

(Disclosure: The author is short Apple (AAPL) from $288.60)

AAPL shares were trading at $288.34 per share on Thursday afternoon, up $4.07 (+1.43%). Year-to-date, AAPL has gained 85.54%, versus a 31.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Taylor Dart

Taylor has over a decade of investing experience, with a special focus on the precious metals sector. In addition to working with ETFDailyNews, he is a prominent writer on Seeking Alpha. Learn more about Taylor’s background, along with links to his most recent articles. More...

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