FANG, the acronym for Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL) (formerly known as Google) was the staple for comparison throughout 2015. These stocks were by far the best performers over the last year, with Netflix and Amazon the winningest of them all. If you put your money in any of these four stocks, you tremendously outperformed the overall markets. And, if you put your money in either of the middle two letters, you doubled your money -- and then some.
These gains are impressive and, on their own, are not a reason to sell. Just because a stock doubled in price over a 12 month period does not mean that it won't move higher in the next 12 months. In a turbulent market, the names that compose FANG are actually good places to be. The appeal of these companies is their growth, which can often maintain its trajectory in a lackluster economy.
However, it's possible that these names are becoming overheated. I'm seeing some action in three of the four FANG names that should get you a little concerned going forward. While I believe in each one of these companies in the long haul, I think the next fiscal year won't be so pretty. If you've enjoyed the ride higher, you may want to realize some of these gains and wait for better prices to reenter. I do think that these prices will come but, given the beta of these names and the overall market volatility of late, I would not be short any letter of FANG.
The three letters that seem to be topping out are F, A, and G. Facebook, Amazon, and Alphabet appear to be forming the head of the ominous head-and-shoulders pattern. In a recent post I highlighted Apple's (APPL) head-and-shoulders pattern, and my prediction of the stock going lower has been playing out very nicely. I believe my analysis of these FANG names has some merit, but I recognize that the stocks' charts are still in the early stages of formation. There will be more analysis coming in the following weeks, so be sure to check back regularly for updates regarding the names mentioned.
Superimposed on the weekly charts above are arcs that help outline the left shoulder and head (you can click on the pictures to enlarge them). There is typically a good deal of symmetry with head-and-shoulder patterns and, because these names all trade higher or lower together, I expect them all to share this symmetry. Each bar on the charts above is representative of one week of trading, and each chart's left shoulder and head are about 12 bars. This is why -- as the right shoulder forms with similar symmetry -- in the next 12 weeks/three months, I wouldn't be surprised to see prices similar to those of six months ago for Facebook, Amazon, and Alphabet.
Want to trade some momentum names to buck the trend of this filthy market? Here are three names worthy of your dollars. Amidst the 2016 market turmoil, history can be helpful in understanding why market crashes and corrections occur. I have an article all about that, and it is definitely worth your time to read it. TLDR: Though good during 2015, Facebook, Amazon, and Alphabet (formerly known as Google) appear to be topping out. I wouldn't be surprised to see similar stock prices to those of six months ago.
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