Stocks rebounded on Wednesday thanks to a dovish “no hike” policy decision from the Federal Reserve that also cut its rate hike forecast for 2016 in half. Now, officials only expect two quarter-point hikes this year.
The catalyst for the move was recent financial market turmoil as well as global economic uncertainties. But with the labor market strong and inflation measures increasing — in some cases, to levels not seen since 2012 — there is a fear the Fed is falling behind the curve and will need to respond with more aggressive rate hikes later this year and into 2017.
For now, the Dow Jones Industrial Average is contending with massive overhead resistance from a two-year topping pattern that started last summer. Moreover, there is weakness in small-cap stocks, financial stocks and biotech stocks, all revealing the reappearance of some selling pressure for the first time in months.
Moreover, a number of big-tech favorites are starting to roll over further, casting doubt on the post-February uptrend continuing from here. Thus, for now, you should keep your eye on the charts of Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX) and Twitter Inc (NYSE:TWTR).
Amazon.com, Inc. (AMZN)
Online retail giant AMZN is struggling at two-month resistance near $580 as the rebound out of the February low fizzles and the downtrend impetus that started in December reasserts itself. Remember: Poor earnings in Q4 soured investors on the stock after a couple of surprisingly profitable quarterly reports raised expectations.
In anticipation of a drop back below the 200-day moving average, I have recommended the Apr $560 AMZN puts to by Edge Pro subscribers.
Netflix, Inc. (NFLX)
Streaming video heavyweight had a big fall from grace after double topping near $130 last year, losing nearly 40% of its value into the low set in February. A nice 25% rebound followed, but now the bulls are getting tired on lingering worries about U.S. subscriber additions slowing down as the market for “over-the-top” video gets saturated.
In anticipation of a decline from three-month resistance, I’ve recommended the Apr $95 NFLX puts to Edge Pro subscribers.
Twitter Inc (TWTR)
TWTR shares have been in the tank since the post-IPO rally fizzled in late 2013 amid concerns about user growth, user engagement, profitability and management churn. A break below the mid-2015 low in January resulted in a near 30% decline into the mid-February low.
A feeble recovery rally ensued that has already been largely reversed. For now, watch for a test of the low near $14.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
