The docile market is seeing some volatility at the stock level as we’ve watched some of the best-known technology names break through the top of the Bollinger Bands during Tuesday’s trading, suggesting that the breakouts are ready to lead to some higher prices.
Three of the larger companies that made these volatility moves are Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB) and Netflix, Inc. (NASDAQ:NFLX), all of which made the breaks of their Bollinger Bands on increased volume — a sign of higher prices to come.
Amazon.com, Inc. (AMZN)
The retail season is getting under way, and not many companies do it better than Amazon. Shares of the online retailer broke through their top Bollinger Band yesterday as the shares move above the August resistance level of $775.
The company was profiled in Barron’s over the weekend, but the move in the stock price was technically driven, as traders are migrating to large-cap tech names heading into the year-end.
Amazon shares are now in a technically overbought situation that may cause a slight pause, but the momentum should pick up to the upside as the rest of the market starts to pile back into this market leader. Watch for a slight pullback or pause to be the last chance to grab Amazon shares before they run towards a possible $850 before the year’s end.
Facebook Inc (FB)
Again, on no real news, Facebook shares poked their head above their top Bollinger Band during Tuesday’s trading. The move occurred on increased volume, suggesting that there is a crowd of technical traders who are now migrating to this and other technology names.
Facebook shares have broken the market’s mold by maintaining a strong trend in an environment that has otherwise seen many stocks and indices locked in tight trading ranges. The shares surged above their post-earnings highs of $128 yesterday on heavier volume. The move above the top Bollinger Band and the post-earnings high suggests that investors are looking for Facebook to move strongly as the September volatility picks up.
Like Amazon, Facebook shares have entered a short-term overbought condition that may force a slight pause, but this should be seen as an opportunity to grab this market outperformer before is sets into its next strong rally.
Netflix, Inc. (NFLX)
Online streaming giant Netflix has struggled to maintain any technical strength as the market around it has become clouded with competitors. Despite that, the stock became the target of buyers yesterday as shares saw heavy-volume trading that shot them more than 2% higher and above their top Bollinger Band.
The technical move will not be without its challenges as Netflix shares are now trading just below their 200-day moving average, a trendline that has been successful in squelching rallies since April. That said, a break above this critical technical resistance level will propel Netflix shares towards the $108-$112 region with some haste as traders will read the breakout as a short-term volatility move.
Netflix is set to announce their earnings on October 17, so there is plenty of room for traders to start buying the potential rumors ahead of their next announcement.
The short-term overbought conditions should wear off quickly and provide traders with the opportunity that they are looking for to hold on to this volatility rally to higher prices.
As of this writing, the Johnson Research Group did not hold a position in any of the aforementioned securities.
