Many on Wall Street are wondering if the once-leading FANG stocks –Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google parent Alphabet (GOOGL) – are out of favor. Given these top tech stocks’ outsized influence on the S&P 500, there could be cause for investor concern.
The FANG stocks, which some have expanded to “FAANG” to include Apple (AAPL), were hit hard this week. Negative headlines continued to swirl around Facebook and Amazon, leading the tech sector lower.
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Kevin Quigg, chief strategist at Exponential ETFs, has even gone so far as to say that the FANG/FAANG trade is dead – for good.
“I don’t know that the individual companies are dead, but I think the collective behavior where all the companies themselves were going to behave in a similar manner, that’s a thing of the past,” Quigg told Investor’s Business Daily via Skype.
“Collectively putting them together and assuming you’re going to get 20-plus percent returns per annum is not sustainable over the long term.”
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Quigg also noted that the tech-heavy influence in the S&P 500 is cause for investor concern.
“The FAANG names plus Microsoft (MSFT) are 28% of the S&P 500. Apple is equal to the bottom 106 companies of the S&P 500. . . their outsized influence in the markets is starting to play out,” Quigg said.
“The time to think of FAANG as an individual company or a trade is over. I think you need to look at the individual dynamics that are running those companies.”
Facebook stock is trading well below its long-term 200-day line and over 22% below its all-time high of 195.32 hit Feb. 1. The warning signs for Facebook appeared before the recent data scandal. The relative strength line, which tracks a stock’s performance vs. the S&P 500, was already lagging for several months.
Amazon
Amazon stock was looking more resilient compared with other FANG stocks. But a report that President Trump is looking to crack down on Amazon sent the stock tumbling below the key 50-day line in heavy volume Wednesday. While shares reversed higher Thursday, the 50-day line could now prove to be a new resistance level for the e-commerce giant.
Netflix
Netflix stock is holding up the best among its FANG peers. The stock reversed higher Thursday to rebound off of support at the 50-day line. This is the first rebound from the 50-day after Netflix’s January breakout, meaning it’s a secondary buying opportunity. But the current market environment warrants being careful about making new buys.
Google Parent Alphabet
Google stock retook its 200-day line on Friday, a good first step. But it’s not clear yet if that can provide true support for the stock. Alphabet is now over 150 bucks below its all-time high of 1,198 on Jan. 29. While shares look to be consolidating, there is not a buy point within reach.
Apple
Apple stock is trading above its 200-day line, but is facing clear resistance at the 50-day line. The iPhone maker will need to retake and hold this level to prove the stock has started to repair the damage it’s seen in 2018.
