Shares of Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), Facebook, Inc. (FB), Alphabet Inc. (GOOGL) and Netflix, Inc. (NFLX) ended Monday in bear market territory down from their all-time intraday highs set between June and October. All of these FAANG stocks have negative weekly charts, which means that the trading strategy is to reduce holdings on strength. Facebook has weakened to below its "reversion to the mean" at $134.30 for the first time ever.
Apple, Facebook and Netflix were in "inflating parabolic bubble" formations before topping out as a warning to reduce holdings. Here's how this signal works – my weekly slow stochastic reading gives readings on a scale between 00.00 and 100.00, and a reading above 90.00 defines a bubble status. This has been an accurate warning of a stock peaks all year long.
All five of these stocks opened Tuesday with downside price gaps. Only Apple did not "fill the gap" to Monday's lows.
Here's a scorecard for the FAANG stocks
The daily chart for AppleCourtesy of MetaStock Xenith
Apple shares began the fourth quarter setting an all-time intraday high of $233.47 on Oct. 3. The daily chart for Apple shows that the stock failed to hold my quarterly pivot of $227.22 on Oct. 5 as a warning to reduce holdings. The stock is below its 200-day simple moving average of $193.89, which indicated risk to my semiannual and annual pivots at $181.73 and $176.57, respectively, which were tested this morning. Given this analysis, investors should buy Apple stock on weakness to my annual value level of $176.57, which was doable this morning.
The daily chart for AmazonCourtesy of MetaStock Xenith
Amazon stock set its all-time intraday high of $2,050.50 on Sept. 4. As the fourth quarter began, Amazon traded around my quarterly pivot at $1,804.55 and failed to hold this level on Oct. 22, which was a warning to reduce holdings. The stock has been trading around my semiannual pivot of $1,546.97 since Oct. 29. The stock is below its 200-day simple moving average at $1,690.13. Given this analysis, investors should buy Amazon stock on weakness to my annual value level of $993.88, which it does not seem likely to reach. There is a weekly value level of $1,377.84 for more aggressive buyers.
The daily chart for FacebookCourtesy of MetaStock Xenith
Social media giant Facebook ended a huge bull market run-up that turned on a dime when the all-time intraday high was set at $218.62 on July 25. A negative reaction to earnings was responsible for that huge gap lower. This led to the formation of a "death cross" on Sept. 20, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices would follow. Investors long Facebook as the second half of 2018 began could have reduced holdings at my semiannual pivot of $202.46. My annual pivot of $162.63 was a magnet between Sept. 6 and Oct. 3. Given this analysis, investors should buy Facebook shares on weakness to my weekly value level of $127.70, which was doable this morning.
The daily chart for AlphabetCourtesy of MetaStock Xenith
Internet content giant and Google parent company Alphabet set its all-time intraday high of $1,291.44 on July 25. That day marked a "key reversal," as the close was below the prior day's low, providing a warning to reduce holdings. The stock declined to my semiannual pivot of $1,101.14 on Oct. 10 and traded back and forth around this magnet until Nov. 8. A "death cross" formed on Nov. 16, and the stock fell to $1,002.21 this morning, staying above my annual value level of $966.02. Investors should buy Alphabet shares on weakness to my annual value level at $966.02.
The daily chart for NetflixCourtesy of MetaStock Xenith
Netflix set its all-time intraday high of $423.20 on June 21, and that day was a "key reversal," with a close below the prior day's low. This was a warning to reduce holdings. The stock began the fourth quarter below my quarterly risky level of $396.87. November began with a monthly risky level of $382.77. My semiannual pivot of $291.84 became a magnet between Oct. 26 and Nov. 16, and a "death cross" formed on Nov. 19, when the 50-day simple moving average fell below the 200-day simple moving average. The stock then traded as low as $250.00 this morning.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.