Which FAANG could have the most bang?
11/09/18

●FAANG stocks have varied performance so far in 2018

●Exhibiting different levels of momentum since late October

●Longer-term performance a signal for near-term direction?


 

What do entertainment, tech hardware, online retail, social networks, and search engines have in common?

Other than the last two, not much, other than being the businesses of a group of companies lumped together as the FAANGs.

In short, it’s an acronym, not an industry, with the common denominator being its stocks have all been high fliers in recent years—favorites of traders as well as investors—and are widely perceived as being dominant in their respective fields. (Okay, okay, it’s not fair to label Google simply as a “search engine,” or summarize Apple as “tech hardware,” but you get the point.)

But even if you did think the companies had a lot in common, the following chart shows Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Alphabet (aka Google, GOOG) have taken very different paths this year:

FAANG stocks, 1/2/18–11/8/18. Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). Varied returns.

Source: OptionsHouse

Despite last month’s downturn, AMZN and NFLX are still up huge on the year, AAPL is up big, GOOG is keeping its head above water, and FB is in the red as it attempts to rebound from its late-July breakdown.

In recent weeks, all the FAANGs had their wings clipped to one degree or another. Zeroing in on last month shows the year-to-date leaders, AMZN and NFLX, actually took the biggest hits during the tech flush-out:

FAANG stocks, 10/1/18–10/31/18. Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). Weathering the storm.

Source: OptionsHouse

FB actually fared second-best during the downdraft, and Apple barely missed a beat. GOOG, holding true to form, held the middle ground.

But AAPL’s free ride ended abruptly in the aftermath of its November 1 earnings release, which beat headline earnings and revenue estimates but seemed to turn off the market with what appeared to some market watchers as a less-than-transparent approach to reporting device sales.1

The chart below compares FAANG performance since October 29, which is when the majority of the stocks formed their current swing lows. With the exception of AAPL, which is still arguably in the process of digesting its November 2-5 drop, the other stocks are in the same position they were in the first (year-to-date) chart: AMZN and NFLX on top with double-digit rebounds, GOOG playing things up the middle, and FB toward the bottom (but up, nonetheless).

FAANG stocks, 10/29/18–11/8/18. Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). And then there were two?

Source: OptionsHouse

The word “momentum” gets tossed around a lot in trading, and it’s as dangerous as it is enticing. Traders always want to catch it, but if you chase it just a little too eagerly, it can turn on you in a Wall Street minute.

But with traders gauging whether October was the end of something or an intermediate low, it’s clear (right now, at least) where the FAANG momentum resides. The ones that were strongest on the year are the ones that have rebounded the most in early November.

Market Mover Update: Intel (INTC) rallied more than 4% off of Tuesday’s close into yesterday’s high, breaking the upside of the consolidation discussed in “Chipmaker waves the flag.”

Stocks initially turned mildly lower yesterday afternoon after the Federal Reserve cited strong economic conditions and reiterated its plan for continued gradual rate increases, which many observers saw as confirmation the Fed will raise rates again in December.2

Today’s numbers (all times ET): Producer Price Index, PPI (8:30 a.m.), Consumer Sentiment (10 a.m.), Wholesale Trade (10 a.m.).

 

Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.


1 CNBC.com. Apple plunges into correction territory after shaking up its quarterly reporting structure. 11/2/18.

2 Bloomberg.com. Fed Holds Rates Unchanged Ahead of Expected December Hike. 11/8/18.