Will the FAANG Lose its Bite this Week? Market Movers April 25 to 29, 2022

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Disclaimer

The examples presented in this article are only to be regarded as a technical demonstration when used with the trading system. Accordingly, these examples should not in any way be construed as a recommendation for any type of trading strategy and they do not constitute any form of advice as to the advisability of investing by the use of any trading strategy. Any Investor who uses a trading strategy must build a trading strategy on the basis of independent testing and according to their specific requirements and needs.

Will the FAANG Lose its Bite this Week?

Stocks & Indices: Netflix in Flux & Verizon Drops a Call

The NAS100 (NASDAQ) continues to show weakness going back to January of this year. US Indices continue to slide into a bearish channel waiting for a breakout from the channel’s support. Will they possibly retract all of their “COVID gains” of the last two years to March of 2019 (when they experienced 150% growth 22 months!!!). Netflix suffered its first loss of subscribers and it first losing quarter in a decade. That didn’t bolster confidence in the robust FAANG (Facebook, Apple, Amazon, Netflix and Google). This week further weakness in those key HIGH CAP stocks could cause a panic with earnings reports from Google/Alphabet, Facebook/Meta, Apple and Amazon all coming out later this week.

The FAANG represents over $7 trillion USD in Market Cap and its mostly exposed this week without even mentioning other reporting tech stocks like Microsoft, Intel and Musk’s buyout target Twitter.  FAANG stocks make up about 10% of the mighty US 100 and 19% of the US500 (less relevant in the US30/DOW where only Apple is the  only FAANG member of the US30).

US30’s Coca-Cola might wet some appetites while tractor manufacturer Caterpillar represents an indicator of the manufacturing sector’s strength.

Earning Reports this Week Feature Trillion Dollar Company Market Caps and Major Trend Setting Sector Stocks

Many Traders will exercise further sells as they experience FMO ( Fear of Missing Out) while others might be buyers waiting for the right entry price on oversold assets.

With this week’s reporting, stocks and the major indices could very well test major tests of supports and resistance levels. Any less than flattering reports enhanced by prevailing inflation numbers seasoned with predicted rate hikes could take the wind out of any stocks appearing overvalued BUT positive reports could attract a lot of buyers to test the resistance levels or higher as Tesla proved last week with its encouraging numbers.

Here’s a chart demonstrating how using the RSI going under 30 on the 4 hour chart of the NAS100 could have averaged a $1,900 USD return per contract the last 6 times and it just went below 30 again without turning around YET. You can look for similar patterns on the individual stocks that make up the US100 or look at the other indices to see if this holds true for them as well.

NAS100 (NASDAQ) 4 hour chart with RSI & Bollinger (20 candle average)

The last 6 times  the US100/NASDAQ became oversold on 4 hour charts, Traders Pounced

Sample Strategy on NAS100:

Some traders execute a trade like this as is or add other conditions like a Trailing Take Profit and Stop Loss

The US Dollar (USD) Bashes Most Majors: Forex & Commodities

The USD  showed strength against all the majors with current & predicted higher interest rates boosting strength. The EUR felt the stress of weaning off Russian oil and natural gas and dealing with millions of fleeing Ukrainians to its lowest levels in years. Meanwhile, the AUDUSD shows interesting opportunities shown in the chart below while the DXY Dollar Index shows the dollar hovering at a 2 year high. German (EUR) & US economic reports this week could keep the DXY reaching for new highs or shake of the roof for a big fall.

TradingView.com provides a free Forex screener where can you look at the Major Currency pairs side by side.
The USD pushed all the Majors (least against the JPY) with the most strength against the the AUDUSD, NZDUSD  & the USDCAD

Watch the DXY ( Dollar Index) for the Relative Strength of the USD while you Trade Against USD assets

The USD showed its strongest standing since the US Federal Reserve lowered US interest rates  to zero at the beginning of the crisis COVID.

The DXY Dollar Index helps view the strength of the USD weighted against the EUR (57.6%), JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%) & CHF (3.6%). The DXY breached 70 RSI on the weekly chart for only the 2nd time since 2015. 

The AUDUSD shows how extreme RSI’s can predict strong corrections to Buy or Sell.

Many traders use a 70 RSI to view an asset as overbought or too expensive and a selling opportunity may exist. Under 30 RSI, an asset may be seen as oversold and cheap or a buying opportunity. With this example, witness how overbought and oversold opportunities correlated with hitting the top and bottom of the Bollinger Bands.  See that the AUDUSD dipped below the 30 RSI without making a correction so far.

Sample AUDUSD strategies:

The AUDUSD reacted to a lot of pressure as USD rate hikes ramp up. Consider adding a condition of using the Bollinger Bands as well by eyeing where the RSI and Bollinger Bands sync on trend reversals.

 

Our popular Trailing Take Profit condition helps assure each trade hits a minimum profit before closing.

Cryptos  Market Cap hits One Month Low at only 60% of All-time High

Crypto accounts for as much equity as physical USD in circulation. Of course there is far more virtual USD in banks, exchanges and other holdings. The Crypto Market Cap is at a one month low. So, the question is will Cryptos hold that support and be a buying opportunity for it to test the moving average? Will Cryptos test or pass through the bottom of the Bollinger Band to lose another 10 to 20% value?

 

Bitcoin lost ground since the beginning of 2022 and there is a strong correlation between BTC and how NASDAQ moves.

 

Bitcoin (BTC) has scalping opportunities like any other asset

BTC , like any asset, provides scalping opportunities in between BIG surges up or falls down.

Sample of Bitcoin trading strategy:

Any asset can be scalped if you recognize a channel on any time period

 

Some traders may avoid using a stop loss even when scalping if they open their short chart trade in the direction of the longer term trend

 

These charts show examples of how to use market conditions with the platform of Captialise.ai.   Create easy to write strategies in everyday English for running RISK-FREE backtesting, RISK-FREE simulations as well as LIVE trades with a funded account. Take your fees and spreads (and swaps on overnight trades) into account when deciding your exit strategy. Trades may use one or more execution conditions with any combination of one, a few or several indicators.

About the author:

David Rhodes is a political and market analyst who started trading in the 1980’s. David worked as a contributing political editor for several publications. He mentored thousands of traders over the last several years. None of his examples are intended to be trading recommendations. Examples identify opportunities in the market and how a trader might create strategies based on those opportunities. Contact David at David.Rhodes@capitalise.ai

 

 

 

 

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