Each day we analyze nuances and subtle changes in market conditions. We start with the indices, transition to sector scans and then individual stocks. During earnings season, we monitor “The Generals” as well. The reason is simple.
These stocks garner the most attention. Investors, traders, bloggers and the media, all focus on a few stocks that lead the markets. The idea is expedient. If the leaders are healthy, the market should be healthy. When this simple equation begins to shift or diverge, we pay attention.
FANG Stocks – The Current “Generals”
Facebook, Amazon, Apple, Netflix and Google populate most of the media news cycles. Sometimes the headlines are very amusing.
Rather than speculate what Amazon earnings mean in the short term, we suggest it is better to look at price action. We like start our analysis by referencing phrase……
“Always ask yourself, where is price relative to the 9/20ema?”
The sooner you focus on price, the more expedient your development as a trader or investor becomes. It’s very simple, eliminate your opinion. Smart investors, hedge funds and dark pools push the market around. We are insignificant. Our opinion does not matter.
Amazon was pummeled? I laugh at the use of verbs. Obviously the writer wants you to read his/her article.
Amazon.com was pummeled on Wall Street on Thursday after its holiday season sales fell short of expectations. EPS: $1.54 a share vs. $1.35 adjusted expected by a Thomson Reuters consensus estimate. Revenue: $43.74 billion vs $44.68 billion expected by Reuters.
Amazon is trading at 806 (+/-) pre-market. We note Fibonacci confluence zones using recent pivot highs and lows. Price is currently hovering in an area that we would categorize as a “not bad.” A truly “pummeled” stock would retrace more than 38.2 Fibonacci. While we cannot know what investors and hedge fund managers have in mind, we can watch price over the next few trading sessions. If price remains in this zone, we would look at Amazon as buy, pending any unforeseen catalysts.
The reason is straight forward. Amazon is still putting in higher lows, despite the temporary set back. A huge VBP support zone starts at 780. Any base that forms above this zone or higher at current levels will delineate where institutions are buying. We will reassess in the next few days.
Facebook remains near 52 week highs. Earnings were well received. Price at above the 9/20ema, with a close right on the 9ema yesterday. Volume by Price (VBP) support starts at 131 and builds significantly at the 129 level. A few more days of price action will assist us with our analysis, so all is not lost. Sarcasm.
Apple is a favorite. We use Apple products exclusively, as the operating system is based on UNIX. As such, our network servers, laptops and desktops are much more stable than Window machines. My comments are meant as sarcasm, while serious at the same time.
Price action is above the 9/20ema. Volume speaks for itself. What else do you need to know? Institutions obvious own shares in this company. Long term hold.
Netflix exhibits the “price relative to the 9/20ema” phrase very well. SOTEMA is bullish. Back and fill should be expected. As the company continues to find ways to expand its user base, the stock will continue to populate the portfolios of hedge funds and 401(k)s. NFLX is trading post-EPS on yet another beat. Until price moves below its 9/20ema, this is a long term swing.
Google is green pre-market. Note price is barely below its 9/20ema and certainly showing signs of a short term bounce. Price is above the 200ma. Stochastic is in the “green zone” and showing signs of a turn. Remember, stochastic was designed by George Lane, to turn before price. VBP support builds markedly at this level (810 +/-).
If the Generals remain healthy, the we look at second tier leaders and continue our analysis. If you do this daily, the answer to the often asked question will become more apparent. Are we about to rollover?
The idea that the indices are about to drop is pure speculation. It’s an opinion. However, price action is a reflection of all things known. if price drops below the 9/20ema on the daily index charts and the Generals begin to falter, then we will reassess our bullish argument. Until then, price is above. Stay bullish.
Happy Trading – Vinny
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