When it comes to investing in growth stocks, many investors turn to the technology sector for answers. More specifically, much of the media’s attention and the weighting of investor portfolios in recent years have been closely tied to the performance of the group known as FANG – Facebook, Inc. (FB), Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX) and Google parent company Alphabet Inc. (GOOG). In this article, we'll take a closer look at a couple key charts from within this group and try to determine where prices could be headed over the coming months.
BMO REX MicroSectors FANG Index 3X Leveraged ETN (FNGU)
With the rise in exchange-traded products over the past decade, active traders who want to gain insight into the trend direction of sector or other niche group of equities can look to products such as the BMO REX MicroSectors FANG Index 3X Leveraged ETN (FNGU) for clues. In fact, FNGU is a favorite among active traders because it offers a leveraged view on one of the fastest-growing segments of the market.
As you can see below, the price has been trading within a descending channel pattern for the past several months, but the recent close above the resistance and subsequent retest (shown by the blue circle) clearly shows that the bulls are in control. Followers of technical analysis will likely hold a bullish outlook and look to open long positions as close to current levels as possible in order to maximize the risk-to-reward. Target prices will most likely be set near the horizontal trendline near $55 over the coming weeks.
Facebook, Inc. (FB)
Feb. 4, 2019, marked the 15th anniversary of the founding of Facebook. On the heels of an earnings announcement that handily surpassed analyst expectations, active trader shave added Facebook stock to their watchlists because the resulting move higher has pushed the price beyond a key level of resistance.
Taking a look at the chart, you can see that the price gapped higher after the earnings report and low looks like it is setting up for a move back toward the late-summer highs near $180 or higher. Some followers of technical analysis will likely remain on the sidelines and look to buy on a retracement toward $150. It is common for a gap in a stock chart to get filled before the stock makes a significant move in the direction of the breakout, and most traders will likely want to wait because a pullback would offer a more lucrative risk-to-reward.
Amazon.com, Inc. (AMZN)
Another FANG stock that needs no introduction is Amazon. Traders are becoming more interested in Amazon stock again because there is a clear inverse head and shoulders pattern forming on the chart. As you can see below, the defined pattern is suggesting that the bulls are gaining conviction, and traders will now likely focus on whether the price is able to break above the neckline (dotted trendline). A close above the resistance level would likely trigger a flood of buy orders and spark a move back toward the high of $2,050.50.
The Bottom Line
High-growth features of technology are often worth additions to any portfolio and are popular early in the year based on rebalancing efforts. Given the charts shown above, it appears as though those looking for some ideas in the space need not look further than the popular FANG stocks.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.