Tickers discussed: FB AMZN AAPL MSFT GOOGL
The blog post is a FAAMG chart review ahead of earnings this week.
GOOGL – Tuesday AMC FB / MSFT – Wednesday AMC AMZN / AAPL – Thursday AMC
FAAMG Aggregate Market Cap Exceeds 2000 bubble high
Much has been made of fact that the market cap of these 5 stocks are higher than the top 5 during the dotcom bubble. As the second chart below shows it was actually quite common for the top 5 stocks to hold a massive share of the total index back in the 1960’s and 70’s. What is more concerning is the narrowing breadth of the market as folks pile into these names. How markets react to these earnings announcements will largely dictate the near term path for the Q’s and the market at large.
FAAMG Charts in Focus
Facebook has a bullish chart set up as price is above all it’s moving averages and has a bit of a cushion above it’s uptrend line off the lows. Even if price pulled back below the 200ema but held both the 50ema and uptrend line I’d remain bullish. If price were to break the uptrend line, I’d expect price to pullback to $172.50. That would be the line in the sand for bulls to defend. Below $172.50 opens a path to much lower prices.
Pretty straightforward set up on AAPL. There is a well-defined resistance level at $286.50. A pop above and hold sends price back toward the highs. A break below the uptrend line likely sends price back to $275- 270 zone for a test of the 50ema and / or the daily pivot. Below $270 would set up a test of the 200ema at $255.
Price is trading in a tight bull flag after an epic run. The high side of the flag is $2450 and the low side is $2330. A breakout above $2450 projects a measured move near $3000. A break below $2330 would likely send price back towards either $2150 at the prior high or key support at $2050 which was the long-standing high. The RSI and PPO indicators are starting to weaken but a positive earnings reaction will over-ride those concerns
Price is near a technical decision point as it grinds into the apex of the ascending triangle. A pop above $180 likely sends this to the prior high near $190. If price drops below the uptrend line I’d expect price to pull back to $167.50 for a test of the daily pivot. The next level of support would be the rising 50ema at $164. Make note of the posture on the PPO and RSI. The PPO momentum indicator doesnt look all that much different than it did in late February. Bulls don’t want to see this to roll over. Also the RSI has broken trend. A move below 50 would favor lower prices.
Price was stopped cold today at $1294 on what was a pretty strong day for markets. That $1294 is an important line on the chart. A break above and hold likely sends the stock higher over time toward the overhead gap at $1440. As noted in the annotations, there is dual levels of support below price with the 200ema and 50ema’s close by. Unless the market completely falls apart, I’d expect either of those ema’s to contain any pull back. If they don’t I’d favor a pull back all the way to $1160 where there is a strong layer of volume / price support.
Pulling it all together
The charts of these names collectively are bullish. They have re-assumed their leadership role in the recovery off the March lows. The market surely knows that $FB and $GOOGL will have huge holes blown in their ad revenue but to this point no one seems all that concerned. We all assume AMZN is benefiting from the stay at home orders but it will be interesting to see if there has been margin compression as folks buy bulky staples and food vs higher end items. MSFT should show strong XBox numbers but what will be more interesting is their take and guidance on enterprise spending into the back -half of the year. I think the commentary and forward view will be key. Although expectations are low and most will give Q1 a free pass, If there is a collective “We have no idea what the back half looks like” that might not go over so hot. Remember, the key is the price reaction, not with the earnings themselves.
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