FAANNG stocks or Facebook, Apple, Amazon, Netflix, Nvidia and Google have been out performing the market for a good while. They’ve also been a on the radar of practically every perma bear in the market. Hard to know if they have shorted it before, but they were calling the top for a very long time. Unsuccessfully.
There are two dimensions that set a good trade, direction and time. They might get to claim to get the direction right, but their timing was totally off. I think now is the time to pay very close attention to the group as it could start turning lower!
Let me start with an equally weighted index of the group of stocks.
The group started showing some serious signs of deterioration. It’s just trading at a rising but flattening 200d moving average. What’s more concerning to me is that both momentum and relative strength are starting to show signs of weakness.
Nvidia, as a part of semiconductors (see Sectors on the watch to short) is already breaking down. Netflix has been one of the best performing stocks in the past few years, even outperforming the group. Last week we got very positive subscriber results, but the stock did not manage to catch a bid.
If selling keeps being sustained and the price gets below $315 I’d be very very cautious. In that case it’s not hard to construct a case where the stock could fall to $265, $165 or even $100 if we see a deeper market correction. In my view Netflix is a great tell for the group as a whole as well.