March 23, 2020

Put Option Traders Take Your Pick

Is Now the Time to Buy FAANG Stocks?

Don’t ask if the FAANG stocks, including Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG), are a buy now. This subgroup had all been leading beneficiaries of the bull market in stocks. The risk-off conditions from January 18, 2018, did not affect this favored grouping; they continued to make significant gains and made up a large percentage of the return in the averages. 

However, today they will play catch up as the need for cash increases, and the flow of investments shifts to new leadership for the new decade. 

AMZN made its all-time high on panic buying, a common occurrence this year for the averages worldwide and many of the sectors and leading shares.  But AMZN is on the verge of a high rate of change decline. The Technical Event Model is set up for the top to low range to expand in April to over 600 points from open to close of the month.

A fall below 1795 would be the first sign of the downtrend kicking off.

Facebook, is boucing off S-T support as seen in the right hand window below. A recover to the low side of I-T new resisatcen at 167 is within reason. I have highlighted the area in red where the market should find push back.

The backgriund of range expansion that begain in MArch – signaled by TEM’s rule #4 signal, calls for more of the same. Hence the 60 point high to low range that hit in March should be exceeded in April. A situation that calls for target if 90 or lower. the middle window has the L-T support zone shwoing a range from 97 to 126. I feel it is resonable for L-T support zones to be broken when new long term downtrends begin.

S-T a bounce today and Tuesday is withing the sennario buy getting above 167 and staying there is not the expecation. Traders – as always – look for success of failure if the makret can get back above that price. S-T support runs from 145 to 154, if a recover above 167 does not occur providing you with a failure short entry with a fall abck below 167, this weeks S-T support zone would be used for enttry triggers.

Googles run to new highs was post triangle, which is a terminal move, and the breakout measured by TEM called it weak and feeble. From the peak, the decline in the weekly bar has been un-interrupted. Short and hold positions would have seen very little underwater.  The I-T support zone is broken, refer to the middle window for the weekly line chart. The low end of I-T support is now new resistance at 1167.00. What is critical here for the Google market is the volatility background to go back into panic mode, after its peaking on emotional buying. That type of flip was seen at the late January peak of the Dow in 2018 

On a Short term basis, along with our Near-Term outlook for the averages, more trading range may precede the massive duty decline.  The Long Term support zone – not shown – starts at 1,000 and ends at 875.  Option traders have a look at Market Map for the scenario that is likely going into May.

A break below 1044 should set the stock on its way.

Netflix has many of the same bearish background setups as the other FAANG stocks. But what stands out to me is the triple top on the monthly chart and how TMT’s overbought-oversold model is so blatantly out of gear. A precise longer-term sell signal. The monthly chart shows the L-T support zone at 200 to 243, a price range that is equivalent to a 38% retracement of the bull market to date and a friendly target for a put trade.

NFLX has moved back into its I-T support zone, a key point of interest for traders. If it can hold and move above 345, the market may be able to grab victory from the jaws of defeat. On the other hand, a break back below 321 would be a bearish omen pointing to S-T support this week at 305 down to 284. Once the trend is intact, the target is 100 points lower from here.


Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

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