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These tech stocks can shield your portfolio if a recession hits, trader says

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As the yield curve inverts again, these stocks could offer protection

Wall Street is on recession watch.

After 10-year U.S. Treasury yields traded below 2-year yields — a market phenomenon known as a yield curve inversion that many market watchers believe to be an early recession indicator — for the third time in two weeks Thursday, investors might be wondering where to hide out amid the uncertainty.

And, for some market watchers, technology stocks appear to be the best hedges against potential volatility or, worse, panicked, widespread selling.

"As you drill down within technology, semis look good," Todd Gordon, longtime trader and founder of TradingAnalysis.com, said Thursday on CNBC's "Trading Nation."

Out of the chipmakers, which Gordon noted show "pretty good relative strength" versus the broader market, he set his sights on two well-known names: Intel and Cisco.

"I kind of wrote this one off. I dumped it from my portfolio," he said of Intel, shares of which are down more than 1% year to date. "But we really seem to be holding the $46 mark here in Intel. So, 44 to 46 is support. Risk is very clearly defined. I think if the overall market would stabilize ... I might put [Intel] back in my portfolio."

As for Cisco, Gordon said its monthslong consolidation period looked to be on its last legs.

"Again, risk is very clearly defined here," he said. "It's been a very range-bound stock. But ... the S&P's been, basically, in a range since … January of 2018. The market doesn't want to move higher. Some of these stocks, dividend payers, are poised to move higher."

Quint Tatro, managing director of advisory firm Joule Financial, wasn't sold on the idea of an imminent recession.

"We're not in the recession camp, so we are actually looking at opportunities that are trading lower because many people are in that camp," he said in the same "Trading Nation" interview Thursday.

"That leads us to the financials, companies like Bank of America, J.P. Morgan, selling at levels that we think they still show great appreciation upside, but also pay solid dividends," Tatro said. "So, if you're not in the recession camp, I think you've got to look at financials."

For those who are more fearful, Tatro suggested a classic protection play.

"If you just are in the recession camp, I think you look towards a traditional recession-proof stock like Coca-Cola," he said. "[The] stock is obviously acting very well in this environment, yields 3%. Trading rich, but again, if you're in that recession camp, then, obviously, there is going to be money flocking to that name."

Tatro also liked Gordon's highlighted stocks, saying they might work best for investors on the fence.

"If you're ... one foot [in], one foot out, names like Cisco and Intel, companies with fortress balance sheets really paying good dividends — Cisco especially, getting hit after that earnings report — offer an opportunity here regardless of whether we're going into a recession or not," Tatro said.

Cisco and Intel shares both fell in early Friday trading. J.P. Morgan and Bank of America also slid, while Coca-Cola's stock was largely flat.

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