The technology companies constituting the FAAMG stocks have defied the bears by continuing to post large gains and lead the market, Barron's reports. These companies include: social networking leader Facebook Inc. (FB); computer and smartphone maker Apple Inc. (AAPL); online retailing and cloud computing colossus Inc. (AMZN); software and cloud computing giant Microsoft Corp. (MSFT); and Google parent Alphabet Inc. (GOOGL).

Shares of Amazon and Alphabet have soared above their supposed resistance levels to more than $1,000, even as bearish technical analysts predicted that Amazon was poised to fall 11%, Barron's indicates. Microsoft shares jumped despite seemingly overbought positions, while Facebook soared past its trading range.

Source: Barron's

What Bearish Technicians Saw

Amazon appeared to be in a head-and-shoulders topping pattern with $935 as its bottom and bears were predicting a drop of about 11% to $825, Barron's says. Regarding Microsoft, technical analysts found overbought conditions, with the stock price having run ahead of its 20-day moving average. The technicians are still expecting a pullback of about 5% in Microsoft before new gains, if any, are registered, Barron's indicates.

However, last week Amazon, Microsoft and Alphabet delivered glowing earnings reports that confounded the bears, sending these companies' shares higher (see details below). Facebook has yet to report third quarter earnings, scheduled for Wednesday, but its shares appear to have broken out from a recent trading range, Barron's notes. Facebook is now trading well above its 50-day moving average, and heavy volume on its breakout move is taken by some technicians as evidence of more upside to come, Barron's adds.

For those who subscribe to the Relative Strength Index (RSI) as a warning sign of overbought conditions and an impending drop in share prices, Microsoft is now far in the danger zone, with a 14-day RSI value of nearly 88, per A value of 70 is the traditional cutoff for signaling overbuying, and Microsoft has been above it for more than two weeks. Facebook is at 65, Alphabet at 69, Apple at 74, and Amazon at 77, according to the same source. Apple only broke past 70 on Monday, and Amazon last Friday.

Source: Barron's

Super Earnings

After the close of trading last Thursday, Amazon, Microsoft and Alphabet released earnings reports, and all delivered fundamental reasons to propel their share prices upwards in defiance of bearish technicians, the Financial Times reports. On Friday, their share prices rose 11%, 8% and 6%, respectively, per the FT. 

The broad and deep strength of the earnings reports was striking. Amazon reported its largest sales increase in five years, with the acquisition of upscale grocer Whole Foods Market being a factor. After stripping out Whole Foods and the impacts of currency fluctuations, Amazon's sales still increased by an impressive 29% compared to the same quarter in 2016, the FT indicates. Indeed, Amazon's revenues have been growing at an accelerating pace for four straight quarters, and market research firm eMarketer projects that the company is on track to boost its share of all online sales from 38% last year to 44% by the end of this year, the FT adds.

Alphabet beat consensus estimates of both revenues and earnings. Its 24% year-over-year revenue increase was its best since 2012, the FT says. However, its capital expenditures are rising significantly, and its move into mobile advertising is bringing higher traffic acquisition costs.

Amazon holds a lead over Microsoft in cloud computing revenues, but Microsoft posted faster year-over-year growth, 90% versus 42%, per the FT. With slow growth in the market for PC software, increasing its cloud computing business is important for Microsoft. Overall, the company's third quarter revenues were up 12%, nearly $1 billion more than analysts predicted, the FT indicates.

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