The majority of FAANG stocks are attracting buying interest at the end of August, turning higher at price levels that could support multi-week recovery waves. However, individual fortunes may vary, so choose exposure wisely if you want to get on board, keeping in mind that short-term profits may have to be taken aggressively when the next wave of selling pressure hits the market in September or October.
Let's start by ruling out Netflix, Inc. (NFLX), which got crushed after higher monthly fees backfired in the second quarter, triggering weak quarterly subscriber growth. The stock will face enormous competitive pressures in coming months, with Dow components The Walt Disney Company (DIS) and Apple Inc. (AAPL) releasing streaming services in the fourth quarter. Taken together with an aggressive shareholder exodus, it's possible that the bull market for Netflix stock has come to an end.
Apple looks like a decent choice for a late-summer trade after it shook off multiple bear raids designed to drag the stock below $200 and break the 50-day exponential moving average (EMA) at $190. The company just announced that it will unveil the next iPhone on Sept. 10, providing a convenient source of buying pressure for the next two weeks. However, keep in mind that these "events" often trigger strong sell-the-news reactions.
Facebook, Inc. (FB) has been an unusually resilient performer this summer despite negative sentiment and the botched roll-out of Libra, the company's home-grown cryptocurrency. The stock traded within 10 points of 2018's all-time high above $218 in July and turned tail, dropping into strong support at the 50-week and 200-day EMAs around $175. The stock has just bounced strongly off this trading floor, in an uptick that may gather strength in coming weeks.
The current uptick marks the fourth successful test at that level in 2019, predicting that the social media giant can now challenge the 2018 high. In turn, the buying impulse could net a 30-point profit for a well-timed position while raising the odds for a fourth quarter breakout that clears resistance at the psychological $200 level. However, the position is best viewed through a short-term lens at the moment, given low odds for a trade deal with China.
Alphabet Inc. (GOOGL) stock has spent the past four weeks building a base at closely aligned 50-week and 200-day EMA support near $1,150 after mounting that barrier with a 93-point rally gap in reaction to July earnings. The uptick stalled within 30 points of April's all-time high at $1,297, partially filling the huge sell gap, and reversed into August. Selling pressure eased after the earnings gap got filled, while the stock has spent the rest of the month working off over overbought readings.
A September recovery wave could reach the opening print of the July gap at $1,228 as a first upside target, but significant buying power will be needed to challenge the April high – for two reasons. First, many shareholders remain trapped within the sell gap and will use the next bounce to exit losing positions, and second, the 2019 high also marks a failed breakout above the 2018 peak at $1,291, reinforcing range resistance that has now stretched across 13 months.
Amazon.com, Inc. (AMZN) shares rallied within 15 points of the August 2018 high near $2,050 in mid-July and turned sharply lower into the first week of August, landing on top of the 50-week and 200-day EMAs. The stock has been testing that support level for nearly a month, while the weekly stochastics oscillator has dropped into the most extreme oversold technical reading since August 2017.
Taken together, a bounce could reach range resistance and complete the next stage of a cup and handle breakout pattern. That would be quite an accomplishment given trade war headwinds, but as we've seen in recent weeks with Walmart Inc. (WMT) and Target Corporation (TGT), market players appear willing to buy top retail names. Of course, that bid could evaporate if trade tensions get worse, but for now at least, the retail group is back on the recovery trail.
The Bottom Line
Most FAANG members look ready to bounce strongly and reward well-timed long positions.
Disclosure: The author held no positions in aforementioned securities at the time of publication.