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)
Sample Strategy on NAS100:
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.
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 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:
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 (BTC) has scalping opportunities like any other asset
Sample of Bitcoin trading strategy:
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