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Chart of the Day / FANG Stocks: Is it Time to Buy Any?

FANG Stocks: Is it Time to Buy Any?

October 29, 2018

We’ve been getting questions regarding FANG stocks – and whether or not they’re buys.

Unfortunately, we wouldn’t buy any of them at the moment.

The Dow Jones just fell 2,506 points. The NASDAQ fell 1,050.  The S&P 500 was down as much as 311 points. Investors panicked and sold.

It even took the “bite” of FANG stocks.  And none look like a good bet right now.

Stay Away: Facebook (FB)

Facebook can’t get out of its own way.

In late 2018, it revealed an unknown hacker breached the site, compromising the accounts of 50 million users.  While the company found and fixed bugs used in the attack, the damage had been done.  Trust had again been put in jeopardy.

Worse, not only did the hackers obtain the ability to access the Facebook accounts, they could access other services you use with your Facebook account registration.

The latest hack is another major misstep for Facebook, which has been trying to win back consumer trust after several recent debacles. Besides the Cambridge Analytics issue, Congress had strongly criticized the company for failing to prevent the spread propaganda.

The latest attack didn’t do Facebook any favors.

While Facebook doesn’t believe this attack will hurt its business, we’re not so sure.  If users can’t trust their data to Facebook, they’ll delete their accounts and go elsewhere, or just stop using Facebook altogether.

Technically, FB is a disaster, as you can see in the chart. After plunging from nearly $220 to $148, it broke through double bottom support dating back to March 2018. Some analysts note they don’t see any solid support for the stock until $140.

Stay Away: (AMZN) took quite a beating in October 2018.

After failing at double-top resistance, it plunged to 1,600 just under its 200-day moving average.  It’s also excessively oversold at its lower Bollinger Band (2,20). RSI, MACD and Williams’ %R were all deep in oversold territory at the time, too.  Also, as long as the stock remains above $1,600, the long-term uptrend is still in place.

We believe a good deal of negativity has been priced into the stock after poor guidance.

But we could see further downside in the stock.

The company saw its quarterly revenue jump about 29% to $56.6 billion.  Unfortunately, that fell short of estimates for $57.06 billion.  Investors were also upset about Q4 guidance of between $66.5 billion and $72.5 billion.  That’s below expectations of $73.87 billion.  What’s troubling about that guidance is that the quarter should be strong, given the holiday season.

Stay Away: Netflix (NFLX)

When Netflix posted Q3 results, thereplenty to like.

The company reported revenue that grew by 34% year over year, while profits soared more than 200%. The most watched metric. In Q3, Netflix added 7 million customers, far exceeding the 5 million it forecast, putting those fears to rest.  Unfortunately, the bears jumped on the statement that 2019 free cash flow would be flat with this year.

Technically, the stock is in free call after failing at overhead resistance at $375.  The next support line for NFLX is $275.  Should it fail to hold that “line in the sand,” the stock could fall to $250 a share, near-term.

Stay Away: Alphabet Inc. (GOOG)

Google parent Alphabet Inc. missed quarterly revenue estimates for the first time in at least two years and reported continuing erosion of its operating margin.  As a result, the stock gapped from $1,250 to $1,061.  Should the stock fail to hold triple bottom support around $1,000, the stock could potentially test $900, near-term.