FANG stocks and other big tech stocks have been sold aggressively in the past week, with significant capital rotating into transports, financials and other cyclical sectors. This price action is unusual in December, which favors the year's biggest winners due to seasonal mark-up pressure, in which fund managers buy the strongest issues to tidy up annual returns. While there is still time for this window dressing phenomenon to unfold, it is more likely that big tech's most widely held issues have posted 2017 tops.

Of course, these issues had gained significant ground in recent months, hitting overbought technical readings that favored profit taking and intermediate corrections. However, this level of selling pressure is usually reserved for January, when many investors sell their biggest winners to incur capital gains tax liability. It is possible that the seasonality calendar has shifted forward this year, with the newly resilient sectors assuming the 2018 leadership mantle a month early.

Then again, more ominous forces may be at play right now. Swift declines in market leadership often foretell broader topping action that precedes much lower equity prices. This bearish scenario will unfold if the relatively stronger S&P 500 and Russell 2000 turn tail and join the Nasdaq 100 and FANG stocks in this selling wave. That does not seem likely given December's positive seasonality, but it can't be ruled out in the ninth year of an economic expansion, especially with higher interest rates on the horizon. (For more, see: Big Investors Go Underweight in FAAMG Stocks: Goldman.)

Netflix, Inc. (NFLX) is leading the downside charge, as outlined in a post on Nov. 30. (See: Netflix Stock's Reversal Could Signal Greater Downside.) The entertainment giant has now broken the psychological $200 level and cut through support at the 50-day exponential moving average (EMA) just above $190. The bottom of a 13-month rising channel near $170 could be tested in the coming weeks, with that support level generating a low-risk buying opportunity.

Facebook, Inc. (FB) rallied through the top of a three-year rising channel in June 2017 and surged to an all-time high at $184.25 last week. It has dropped 14 points since that time, filling the Oct. 27 gap, and the stock is trading below the 50-day EMA for the first time since Sept. 26. On-balance volume (OBV) peaked ahead of price in early November and has now dropped to a six-week low, highlighting unusually strong selling interest. The next oversold bounce should tell the tale, with high odds that aggressive sellers will reload positions near $175., Inc. (AMZN) broke out above the July high at $1,083 in late October and surged to an all-time high at $1,213.41 on Nov. 27. It turned lower into December, dumping more than 80 points, but it is holding well above its 50-day EMA and short-term support near $1,110. Even so, the weekly stochastics oscillator has crossed into the first sell cycle since August, predicting six to 12 weeks of relative weakness. In addition, OBV topped out in July, generating a bearish divergence that predicts lower prices. (For more, see: Amazon Stock Poised to Rise 30% on Cloud: Wells Fargo.)

Alphabet Inc. (GOOG), the former G in FANG, topped out just above $1,000 in June and dropped into a summer correction that found support near $920. A September rally picked up speed into a late October breakout, lifting the stock to an all-time high at $1,080 last week. It has dropped nearly 70 points in the past five sessions, filling the breakout gap while undercutting the 50-day EMA, and the stock is now testing new support at the June high and psychological $1,000 level. Meanwhile, OBV has dropped to a two-month low, pointing to significant selling pressure that could presage a breakdown.

The Bottom Line

FANG stocks, semiconductors and other big tech issues have been sold aggressively in the past week, raising the odds for intermediate tops that could presage underperformance in the first half of 2018. Even so, bulls are likely to take an aggressive stand in the coming sessions, lifting these issues into the middle of multi-month trading ranges. (For additional reading, check out: Tech Founders See $7.6B Value Wiped Away in One Day.)

<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>