It’s not yet a full-fledged choir, but if you’re listening you can hear the canaries singing – Netflix (NFLX), PayPal (PYPL), and now Meta Platforms (FB). And the songs are something straight out of Yoko Ono.
Sure, Alphabet (GOOGL) provided a smokescreen yesterday as it gapped up on good earnings news and finished +7 ½% higher to close @ 2960. It made a new all-time intra-day high, too. But we still think the stock is a sale. Truth be told, we did not anticipate GOOGL’s 20% rally over the last 7 days – that’s on us. But we’re still going with the idea that GOOGL is a sale up here and we believe its action is not the “tell” – the “tells” are coming from NFLX, PYPL, and FB.
Heck, the “tells” have been coming at us for a year it’s just that the message provided by these “tells” – Percentage of NASDAQ Stocks Above Their 200-Day Moving Averages peaked in Feb 2021 @ 92% and moved to a recent low figure of 21% and NASDAQ’s 10-Day Moving Average of Net New Highs also peaked in Feb 2021 @ 456 with its most recent low figure of -829 – was obscured by the action in The Big 7. But no longer.
But with NFLX, PYPL, and FB singing like Mafia rats we believe these stocks offer better, and certainly cautionary, clues for investors than does GOOGL. What follows is not hyperbole, but we seriously think the following question needs to be considered. “What if the price action for NFLX and PYPL, in that by getting back to their post-COVID breakout, is what we should be expecting for most major tech stocks?” Said another way, “Are we watching the slow bleed for tech as it gives back its gains from the post-COVID breakout?”
While NFLX has returned to its post-COVID breakout level we don’t think it’s a buy here. And it won’t be until, at least, we see some basing action or improvement from our long-term momentum work. Too, while NFLX did return to its post-COVID breakout level – which is support – it would not surprise us to see the stock break lower again.
The story is virtually the same for PayPal in that while it did return to its post-COVID breakout level – which is support – it would not surprise us to see the stock break lower again.
FB’s post-earnings downside is not yet reflected in this chart, but the horizontal box is the estimate for where it is slated to open today. It, unlike NFLX and PYPL, is not yet at its post-COVID breakout level but we believe it’ll get there and, like NFLX and PYPL, it would not surprise us to see the stock break lower again.
We wouldn’t be surprised if HubSpot followed the paths of NFLX and PYPL. HUBS was recently down 53% from its November 17, 2021, high. But to get back to its post-COVID breakout level of 200 the stock would drop almost 60% from yesterday’s close.
And please check the chart below to see what similar action would look like for NASDAQ. The 10,000 support area for the index is its post-COVID low breakout level. And even if you think this potential downside target area is nothing more than technical malarkey, we figure reducing big cap tech / NASDAQ on any rally – like the one driven by GOOGL yesterday – continues to make sense.
But it’s not just NASDAQ, nearly all of the major indexes are in our sell zones. Here are the levels we’ve been going with.
Lastly, please also recall that we are going with the idea rates in the US and Europe will work higher – “Plus ca change, Ms. Lagarde”; “Mary, Mary…Why ha buggin?” – and that Bitcoin is a sale.
