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Facebook remains under long term pressureThe sharp rejection of the October highs is attempting to stabilise above USD113.00. Consolidation is highlighted in the coming week or so, but the fall in momentum studies and deterioration in sentiment are likely to keep prices under pressure into the beginning of 2017Q1. Also, from a relative perspective, Facebook is also underperforming the US Technology Sector, which itself is Underperforming the S&P500. This double filter also highlights downside risks into the coming months.
NASDAQ:META
by Michael_Macdonald-XATSUK
LONG FACEBOOK: 7% PULLBACK & SOLID FUNDAMENTALSWanted to make this post as FB as opened up a chance for a lower risk entry point. FB has pulled back 6% which is the first time in months that it has given any $ away to the market - hence i recommend buying and holing until 1$20. Trading strategy I suggest buying in a pyramid, and adding more long FB if it continues to fall e.g. 1@114 2@111 3@10 6 etc As FB is such a strong stock in terms of net income and revenue (grew 250% yoy in april) and holds a monopoly in the social media market. Volatility - Vols have been trading higher for FB in recent days, with Implieds trading much higher (26% vs 14%) than HV possibly inferring that the market is expecting further pull backs BUT the above trading strategy is built for a scenario like this (and actually is more profitable is FB continues to fall) - One thing to note is that it isnt really shocking for FB Imp Vol to be trading higher, since price falls = higher vols in general - and i may add that implieds are still only trading at the 40th percentile , i consider 80th to be extreme/ worrying so we have some cushion before we get to that. - Finally FB risk reversals are trading at +0.8, meaning in the options market we are seeing more demand for calls at these levels - this is a bullish bias for the spot stock market also as it is an indicator of overall sentiment. Volume - FB volume has spiked predictably, as we would expect in a falling market, but it still trades about the average so i think Supply/Demand is balanced so it is safe to enter. -I would like to see volume trade below average in the coming days to help give us a bullish push but i am not worried if not - infact i would prefer some further downside since FB hasnt given us much for months. Technicals - We have a nice support handle at 113, 110, 108 - clear re-entry points for me. FB ATR is trading below average which is good meaning price volatility isnt too stochastic, and this is just a controlled pullback. - It also looks like FB is just filling the earnings gap it created in April. The actual candles formed have traded about the median, with equal wick/ range lengths higher/lower, which also suggests this downside doesnt have too much momentum, as i would expect to see the price close at the lows if this was the case. - Also as you can see FB is trading at the -2SD level on the 4h, which historically is a good level of support and another + for entry. We have also just crossed the 60 day VWMA meaning that FB is trading at a cheap price which is good for entry and a higher probability trade.
NASDAQ:METALong
by QuantumLogicTrading
APPLE: BULLISH VOL CROSS AND SUPPLY SIDE; BUT DEMAND DEFICIENCYVolume Apple Volume traded up for the first time in 4 days on thursday, increasing 25% from 20m to 26m, whilst this may be considered bearish - as increased selling, it is important to not 26m is still 35%-40% below the 4wk and 6month average. Volume cannot fall forever and we have been trading at extremely low volumes all week, so given these facts, a modest rise from 20m-26m is still bullish IMO given that apple traded at 46m last week, so even at 26m now we are still significantly depressed on the supply side - though the demand deficient problem of the recent times remained rife in the stock yesterday, where the stock fails to attract new liquidity, which is all the stock needs to ask the price up given the perfect, low supply environment apple is currently in. Historical and Implied Vols We continue to have a bullish view from a vols perspective as implied traded flat yesterday, up only 10bps at 21.02. Also, a bullish cross pattern emerged between HV and IV, where HV is crossing lower then IV. The shorter period 5/10 HVs are already trading below IV, but yesterday the 20/30 period HV also made a bid to make a move below IV in the coming days. As i have highlighted from the last bull cycle on the graph, when the 4 HVs traded bid and started falling (to eventually trade below IV), Apples price was bullish, rising over 10usd, such interactions between HV and IV is historically highly correlated bullish behaviour. In april as you can see it was Earnings uncertainty that caused the relationship to unnaturally break down - in previous bulls, the HV < IV has allowed bull runs to continue for several months before. Vol correlation with apples price also traded flat remained above the -90% and maintaining my bullish view with the indicator. Evaluation Much of same from apple, where we are witnessing a perfect "bull run" environment (low all round vols, low volume, low price) but the demand side remains the issue - likely due to apples poor mirco-econ environment of poor confidence/ fear regarding their future performance and the ever looming July Earnings, which is artificially keeping demand low for apple. I dont expect any significant upside today from apple, given fridays are normally the worst day for stocks due to the "end of week" sell-off that occurs as some money managers cannot hold open risk on their books over the weekend. IMO i expect apple to close 99.2, higher if we are lucky. If we dont have a bull run soon, we may not see one until august, given that i expect apples price to trade low/ down in the 3 weeks before earnings as investors remember Aprils tragic sell-off and try to avoid a similar event (even if it is unlikely).
NASDAQ:AAPLLong
by QuantumLogicTrading