Stocks are set to continue their winning ways on Tuesday after the major indices closed at new all-time highs on Monday’s strong move. The rally has an interesting aspect to it as financials and small caps are taking a leading role in the advance. What is eerily absent from the punch higher are a number of the large-cap technology stocks, namely the investor favorite group referred to as the “FANG” stocks.
Today’s three big stock charts looks at the technical pictures of Facebook Inc (NASDAQ:FB), Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN), as these three stocks in the popular group are lagging the market. The charts help determine whether it is just a pause in the action for each or if there is something larger on the horizon worth avoiding.
Facebook Inc (FB)
Facebook has been in the news for some time over the reliability of the news that is disseminated via its social media platform as well as how it is going to continue to morph its successful advertising model to what appears to be a shrinking active group of users. FB stock has suffered some setbacks, taking it out of its leadership role, but now the stock is teetering on a potential shift into an intermediate-term bearish outlook.
- Facebook shares have been trading at the top of their range, finding resistance at the $172-$175 spectrum since the post-earnings rally. The consolidation has allowed the stock’s trends to slow and start to reverse. This puts FB in a technical tight spot as a break of these trends may cause traders to begin selling instead of holding the stock at the top of its range.
- The Chande Trend Meter (lower chart) is moving into a bearish outlook as the distribution and trend of recent prices are reflecting a negative bias. This adds to the downside pressure and risk for Facebook stock.
- Investors and traders looking for an indication of whether they should be turning to sellers to lock-in profits should watch the following two things over the next few weeks, a combination of these two failures will signal a 5-10% pullback is coming;
- Whether the stock is able to maintain prices above its 50-day moving average.
- If FB’s price per share is able to hold the bottom of the range at $165.
Amazon.com, Inc. (AMZN)
We’ve been crowing about the worrisome pattern in the technicals for Amazon for more than a month as the online retailer appears to be losing its edge, at least from a trading perspective.
The stock has fallen into a pattern we forecasted in August as being bearish for traders and it appears to be worsening.
- AMZN shares fell into the technical trap of posting lower highs and lower lows as a trend starting in August when the stock broke below its 50-day. Since then, the stock has seen increases in selling volume and less buying volume on these swings. This is a sign that technical traders are not supporting Amazon stock, but instead the force behind its decline.
- The 50-day moving average for AMZN stock is now in a decidedly bearish pattern. Last month, we saw a rally in the stock stall as it hit the declining 50-day, confirming the bearish outlook.
- A near oversold signal from the RSI for Amazon stock helped form a short-term bottom on Aug. 25; however, this rally is already running out of steam, which would tag it as a “dead cat bounce.” Watch for a quick reversal around $975 that could target the next large move to support at the stock’s 200-day moving average. That would amount to a 5% decline.
Netflix, Inc. (NFLX)
Things have been relatively quiet for Netflix lately as we’ve not seen too much in terms of “headline news,” which is what often adds to the stock’s upside volatility.
The stock has been trading in a range between $165 and $190, since the last earnings report, and the recent move lower is providing an indication that we may be heading back to the bottom of this range — a 7% decline from current prices.
- NFLX shares saw a hard stop at the $190-resistance-level near the end of September and have seen selling pressure on an increase in volume. This indicates that active traders are taking their cue from the top of the range to take short-term profits.
- Netflix shares are now breaking through their 50-day moving average. The stock was able to hold this trendline as support in mid-August; however, momentum on NFLX is turning negative suggesting that the risk of this trendline failing is high.
- The last real break of the 50-day saw Netflix shares drop 10% in late June/Early July. Our read of the chart suggests that a similar reaction is likely here with support likely to kick-in at $165. Watch this trendline closely over the next few days.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
