Technology stocks still face some turbulence, and analysts say it may be a good time to stick to the more defensive names in the group.
This week's tech washout sent alot of investors in the group to the sidelines as the S&P technology sector fell 3.4% and the Nasdaq lost 2%, its worst week since last July. Nasdaq is still up 1.5% since Jan. 1.
Said CNBC's Jim Cramer, who on Wednesday said it's time to sell tech shares, "People are leaving the group because they know the party ends right now and begins again in September."
The tech sell-off this week has renewed debate about tech seasonality, an annual event in eight of the 11 years when tech stocks have surrendered ground in the beginning of the year.
In fact, Bear Stearns today issued a research note on the trend. Analyst Andrew Neff said technology stocks tend to underperform, relative to the market between February and May, based on an analysis of 20 years of trading data.
"While we see the continuation of a moderate growth environment for technology spending, we think investors need to factor seasonality into consideration, as it often leads to pullbacks and a reversal of positive sentiment," said Neff in his note.
Neff said investors have a couple of choices. They could wait for the downturn to end, hedge their current positions or focus on more defensive stocks in the group early in the year.
CNBC's Jim Cramer said on "Mad Money" Wednesday night that the time has to come to sell tech based on seasonality. He said there are several stocks he continues to favor but for the most part the group should be avoided. He went negative on semiconductors, software, storage and heandheld computers.
The stocks typically do better in the fall when corporations make spending plans and consumers shop for electronics for the holidays.
Strong Products and Earnings
Cramer suggests investors stay with tech stocks if they have strong products and strong earnings.
"I think tech will ultmately outperform this year, but most of the performance will be after September," Cramer told CNBC.com. Cramer said for now, semiconductors are the most dangerous group for investors.
Some high profile names in the sector were punished severely as they reported earnings this week. Apple, for one, fell sharply after it disappointed investors with its forecast.
International Business Machines, which reported fourth-quarter results Thursday, was sold off after it reported earnings that beat Wall Street expectations but still disappointed investors. The stock had risen 21% over the past 12 months.