FAANG Stock Breakdown

Damage to the stocks in this group is uneven. Are some of them bottom fishing plays, others outright sells?? Here are the charts complete with pithy comments. Facebook looks to have taken the worst of it.

The good news here is that the 50dma is still above that broken trend line. There is also a money flow divergence (for the moment) The strong hands money (A/D) did not lean into that last wave of selling. The OBV has pulled back to 2108 levels along the trend line. Suffice it to say the money flows were rolling over hard before the last leg down. There was a brief sharp rally of about 1/3! Analyze that rally and you might have the key to this one.

FB was in a weakened position and the sellers unloaded hard on the brand. Problems here go back to the 2016 election, and competing political claims against their open platform policies. On the positive side this stock is a METAverse darling.

On point and figure the BEARISH OBJECTIVE is 129. The stock is already down 30% YTD and that would amount to another 45%. The P&F column of O’s is also in first wave status which means it is “tentative”. That means that if the price continues lower without a three box reversal, the bearish objective can extend lower. If too much market cap evaporates the company’s spending plans will get shelved.

I am inclined to think about it this way. Down 30% is a bear market already. Facebook has a number of other franchises, and this is like YUM for the social media investor. Damage to their image as a “tech” company was caused by their “media” company problems. They don’t want to be taxed and regulated as a media company. When the psychology of “nothing but……” takes over investor sentiment, valuations can tumble. So far most consumer goods have avoided this problem, (FB is a consumer service) but back in the 1970’s when that mentality was felt, they built warehouse stores and generic products in yellow wrappers. Brand loyalty vanished, as it is now at grocery stores, where house brands are gaining market share. Then there is GOOG.

This is more hopeful. The money flows are all okay. The OBV is actually pretty positive. The trend line is well below the price (two edged sword) and the yellow arrow is the point and figure BEARISH OBJECTIVE, which is above the trend line. Unfortunately the column of O’s is “tentative” meaning the objective could expand.

This one is down 21%, YTD, with another 17% to meet the objective. Google is the GM of the FAANG group. I would measure this one against the possibility of a prolonged NASDAQ style selloff, which happened when the Fed raised rates circa 2000. That was the dotcom bubble. I don’t consider the dotcom bubble as relevant to these current “tech” stocks. (Most of them aren’t tech at all)

I do wonder if ad revenues are priced to perfection. Some online platforms are actually trying to charge subscription fees, and after the long holiday period in which access was free, I doubt that consumers will accept the pay for view solution, but I didn’t think they would ever get pay to play online music, and they did. In the “nothing but..” world, Google is an online encyclopedia. Apple is probably still the group leader, right?

Sort of a waste of time to put this chart up. I did take it off log and although it has a longer time frame than the previous two I cut if off at 2014. Money flows are consistent with the government money printing machine. That’s good. (Maybe they just nationalize this company?)

The point and figure is on a “sell” signal, with an objective of 148, and that is fixed. Down 8% YTD the additional drop would be another 9%, which is still above that trend line which is contentious anyway. The Smartphone is one leg of the METAverse, and Apple seems to have that nailed down. No point in calling this a bottom fishing candidate. So far you see some interesting comparisons, while all these stocks are moving at very different rates, they all are about half way to their bear market objectives. There there is AMZN, the retailer in the cloud.

The rollover in the money flows is less severe than Facebook with none of the negative news. Why is this one rolling over, wasn’t post pandemic lock down good for online retailers? There is no trend line, but rather a three tiered fan which has broken apart a little at a time. This one is death by inches.

The second fan broke before the pandemic. I was at a tech seminar in the late 90’s, the head of TA at my broker, when brokerage houses still had inhouse technical analysis, was Louise Yamada, very good in her field. She postulated that the flat market could go on for years and that would constitute a zero loss correction, which would resolve itself in a new bull market.

Then the bottom fell out in 2000, but I want to opine that was an exogenous event, in my estimation. Anyway AMZN is down 0% YTD but the P&F objective is 2887, and objective is down 13% and that is tentative. I think the risk in this one is far greater. The consumer by most analysis is strong here. I see a ship with full wind in the sails and going nowhere. A recession looms like a dangerous reef especially if gasoline prices remain stubbornly high and with mask off dynamics shoppers may return to stores where inventory backlogs are being worked off. One suspects even if the animal spirits return this one will not benefit to the same degree.. Finally the darling of the dumpster diving stocks, NFLX

The good news here is that the bearish objective is ALREADY MET! Down 64% YTD. The subscriber hit I mentioned earlier, hit these guys really hard, while formerly open websites begin charging, or in the case of Netflix they try to bring in their too loose policy on sharing subscriptions. The real issue about this is how much exposure, consumer goodwill did they earn giving away content? Probably a lot more than most investors believe. By example my friend works at a minimum wage job, and she goes to the various food banks. This isn’t government cheese they’re giving away. I have been trying a lot of things I never thought to buy, now I like them and I buy them regularly. Those retailers earned a lot of business giving away samples during the pandemic.

The cost of the original content begs the question, how much is too much? I asked myself that question some years ago when Papa Johns pizza came to my town. Pizza vendors are stacked three deep already, and I shorted the stock, but they found a niche. On the other hand the ONE BBQ place, Famous Dave’s, went bust. So I never think there is too of anything, as long as consumers want that thing.

I am not excited about this right now because the market is going to provide a headwind for this one. Still those money flows are long term positive. What this one needs is time, and so where you buy, where you sell, and where you hold this one, matters most of all. Buy low and sell high. If I told you stock “A” would be exactly at the same price a year from today as it is today, and you own “A”, and you love it, you could sell it and buy a one year Treasury note and beat the return, then buy it later.

In sum: FB probably has the most potential, if it avoids the label of “media” company. I imagine they need a CEO to stand in for Zuckerberg. This stock has the largest downside based on the technicals. Based on change at the top and full on METAverse status, not the lesser media company designation, this one can fly.

GOOG really is the online encyclopedia, and probably the most solid of the group depending on where group valuation finally comes to rest, down another 15% raises the bar. Buyers want lower prices…

AAPL is bulletproof except for all that free and easy Chinese labor. The Smartphone is a mature system, what happened to the PC when it reached saturation? Downside of 9% says to me, upside of 9%.

AMZN is my least favored. In macro terms the era of consumerism may have come to its logical conclusion. We need solutions to our problems which are corporate; pandemics and cyberattacks are not solved with unique consumer solutions.

NFLX creates a consumer product, along the lines of a pharmaceutical company. Maybe the era of consumer products is ending? But wait! Pharma companies are paid well at the release of a new drug, just like Hollywood studios make money on the release of a new movie. They also make some on the residuals in syndication. Government now subsidized directly these vaccine makers, and who knows what in the future.

Content makers will move to counter the anti-woke Disney cancel culture in Florida, and the era of anti-social comedies like the Simpsons, (FOX), is done. Is Ron DeSantis, Bart Simpson, all grown up? Yellowstone is going to be more like Broke Back Mountain. Suddenly content matters. The more it changes the more we watch…

The censors hammer falls, on hate speech, misogyny and racism. More interactive METAverse content means things will definitely change, marking and end to television violence as catharsis, and carrying guns to the supermarket is last generations street theater. Hey, we’re interacting here…

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