Party Over for Nasdaq QQQ, AAPL, AMZN?

Tech stocks have been on fire before hitting an ‘air pocket’ last week. Is the current dip the end of the tech party or a buying opportunity?

After pointing out Fibonacci resistance (for QQQ) at 143.75, the May 31 Profit Radar Report noted that: “The Nasdaq-100 painted a bearish reversal candle today. Every red candle high (since October 2013) saw lower prices at some point over the next 1-2 weeks.”

Seven days after the May 31 bearish reversal candle, the Nasdaq suffered a monster reversal candle. Volume (for QQQ) soared to a 2017 record. The June 9 ‘red stick’ erased 10 days of gains.

On that day, more than one third of the 100 QQQ ETF components suffered a buying climax (where a stock rallies to a new 52-week high, but ends down for the week). Buying climaxes are generally a sign of distribution and indicate that stocks are moving from strong to weak hands.

Similar buying climaxes in 2010, 2014, and 2015 led to noteworthy pullbacks.

The problem with extreme ‘air pocket’ days (like June 9) is that they almost instantly create an oversold condition, and the propensity for a bounce.

Next support for QQQ is at 137.20 – 135.70. Resistance is around 141. Support may cause another bounce, but risk of further losses remains elevated as long as QQQ is below 141.

AAPL

Due to its humungous market cap, AAPL is Wall Streets’ VIP and MVP stock. More often than not, if AAPL sneezes, the S&P 500, Nasdaq and at times DJIA will catch a cold.

Based on the long-term black trend channel(s), we determined that up side for AAPL (and indexes like the S&P 500 and Nasdaq) was limited after hitting 155 in May.

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Support worth watching is around 140 and 135.

AMZN

The May 29 Profit Radar Report stated: “AMZN almost cracked the 1,000 mark, which more than anything is a psychological ‘resistance’ level. Cycles project a severe drop for AMZN. Last time this happened (late 2015), AMZN reacted late, but ultimately dropped around 30%. Although more gains are possible, late buyers will probably end up regretting their decision.”

Since May 29, AMZN gained as much as 2%, but subsequently dropped as much as 8.8%, before finding support around 925 (green line). 925 and support near the black trend channel deserve to be watched. It would take a move above 991 to unlock the potential for new highs.

Summary

Based on our research, we don’t expect to see a major market top at this time, but QQQ, AAPL and AMZN are likely to enter a period of consolidation and quite possible some ‘shake out’ moves designed to shake out weak hands.

The Profit Radar Report’s goal is to simplify investing decisions, avoid big losses and spot high probability, low-risk trades. The Profit Radar Report hasn’t suffered a losing trade since June 2015.

A comprehensive analysis for the S&P 500 is available here: Comprehensive S&P 500 Update

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

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4 Iconic U.S. Stocks that Lost 49% While You Were Sleeping

Overnight, four iconic U.S. companies lost 49%. One of them, a reputable blue chip Dow component, wiped out four years worth of gains while investors were sleeping. What does this performance mean and can it be detected/avoided?

The biggest danger is one you are not aware of or can’t predict. For individual stock investors that’s gap down opens. Such overnight losses leave big chart gaps that often by-pass stop-loss orders.

October has been a particularly treacherous month as four iconic U.S. companies lost a combined 49% while shareholders were sleeping. Talk about a financial overnight coronary event.

In the night(s) from October 17 (Friday) to October 20, IBM (NYSE: IBM) lost 8.35% and wiped out four years of gains.

In the night from October 20 to 21, Coca Cola (NYSE: KO) lost 5.75%.

In the night from October 23 to 24, Amazon (Nasdaq: AMZN) lost 9.10%.

In the night from October 15 to 16, Netflix (Nasdaq: NFLX) lost 25.83%.

Is there a common trigger for all those coronary events?

Is it possible to detect and prevent owning stocks before an overnight collapse? 

The chart below shows IBM, KO, AMZN and NFLX side by side.

Trading volume spiked every time on the day of the coronary, but there was no consistent pattern the day before (which was the last day to get out in time).

A look at commonly used technical indicators – such as moving averages, MACD, RSI, percentR – also shows no consistent pattern.

Netflix and Amazon were unable to overcome their 20-day SMAs the days prior to the gap down, but Coca Cola ‘slept’ above the 20-day SMA the night before it fell out of bed.

Amazon triggered an MACD buy signal the day before it tumbled.

The only way to avoid individual meltdowns is to invest in baskets of stocks via ETFs or other index-based vehicles. The link below discusses which type of ETFs are best in this stage of a bull market.

The One Common Denominator

There is, however, one common denominator, indicated by the little telephone icon. All companies reported their earnings just before the big gap down (either after the close or before the bell).

Do Gap Downs Foreshadow a Major Market Top?

Excessive amounts of selling pressure are a reflection of investor psychology.

Gap ups on the way up are a vote of confidence; gap downs show that investors’ confidence is eroding.

Erosion of confidence is one of the tell tale signs of an aging bull market. This doesn’t mean the bull market is over, but it shows that investors are becoming more selective.

The number of outperforming stocks shrinks as more and more individual stocks fall into their very own bear market. In fact, currently 31% of all NYSE stocks are trading 20% or more below their highs.

In other words, a third of all stocks are already in their own individual bear market.

A historic analysis of major market tops puts this deterioration into perspective and shows how close (or far off) we are from a major market top. It also shows which sector is the best to invest in right now.

Here is a detailed look at the 3 stages of a dying bull market.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

The Amazon-Google-Nasdaq Mini Crash Explained

It’s been a bad couple of days for the stock market in general and technology stocks in particular. A gradual decline has turned into the quickest loss since 2012. Here’s what predicted this mini meltdown weeks in advance.

Gradualism is a slow change, and changes in slow stages are less shocking than sudden changes.

Case in point, today’s and Friday’s big Nasdaq drop is getting a lot more attention than last month’s slow Nasdaq deterioration.

The gradual stair-step lower has now accelerated into a 6%+ correction for the Nasdaq QQQ ETF (Nasdaq: QQQ).

But the warning signs started as early as January. On January 5, the Profit Radar Report featured this warning commentary:

Trivia: Which high-flying tech leader has a P/E ratio of 1,403? Tip: This stock is the fourth biggest component of the Nasdaq-100. Answer: Amazon (AMZN). Amazon founder Jeff Bezos is a true visionary and Amazon is working on amazing technology, but ultimately earnings are more important than pure vision. Near-term support is around 380. A close below 380 would open the door for much lower targets.”

The February 2 Profit Radar Report included the following update on Amazon and a shocking new warning for Google.

Here’s the Amazon update: “Amazon gapped below support at 380 on Friday, unlocking a potential target around 340 or 320. Resistance is not at 380, which would be a low-risk entry to go short for aggressive investors.”

Here’s the shocking (at the time) February 2 Google warning:

Better than expected Google earnings propelled the stock to trend line resistance. This may be the end of the rope for Google and an opportunity to leg into a strategy that profits from lower prices (short GOOG, buy GOOG puts or sell GOOG calls). Support is around 1090.

Fishing for tops of high-flying tech companies is risky business, but can pay off big (i.e. short AAPL, see recommendation in Sep. 12, 2012 Profit Radar Report). GOOG is over-loved (the timing to issue lower-priced shares could be indicative of a top), cycles point lower and RSI is lagging prices. Nevertheless, strong momentum can overwrite bearish forces for a while. Legging into short positions at various prices reduces the risk of catching a falling knife.”

The recommended Amazon and Google put options are up 100 – 300%, but more importantly Amazon.com (Nasdaq: AMZN) and Google Inc. (Nasdaq: GOOGL) account for over 10% of the Nasdaq-100 and therefore foreshadowed a period of Nasdaq underperformance.

A March 31 examination of the Nasdaq VIX (VXN) compared to the S&P 500 VIX (VIX) showed increased fear about Nasdaq stocks (see chart below published on March 31).

This fear of holding the hottest tech names became more obvious in early April when ‘old tech’ names like Microsoft, Oracle, CSCO and Intel smoked ‘new hot tech’ names like Facebook, Tesla, Netflix and Priceline (click here for April 2 article: “Why ‘Hot New Tech’ is Getting Crushed by ‘Old Tech’).

Although it may seem like it, the Profit Radar Report is not a stock picking service. The Profit Radar Report’s focus is forecasting movements for the S&P 500 (and at times Nasdaq and Dow Jones).

But sometimes certain stocks get too ‘bubblelicious’ to ignore (and serve as early warning indicators for broad indexes).

As far as the S&P 500 is concerned, one deceptively simple chart that warned of an S&P 500 top around 1,900 was published here on April 1 (important detail: The chart also highlights key support).

S&P 500 Stuck Between Triple Top and Triple Bottom

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Four Tech Giants Fight the Secret Battle of Web Domination

Talk about high stakes. Four young technology giants are fighting for the most important and valuable commodity in the world. The bigger your slice of this commodity, the closer you get to ultimate web domination.

This man has a dream. A big dream. His dream is to make a ‘vital’ resource available to everyone in the world.

His mission website – internet.org – makes his dream seem philanthropic. His dream is to help farmers, students, patients, everyone on the planet. To help them share knowledge.

His dream is internet access for everyone. The man with the dream is Facebook founder Mark Zuckerberg.

The true intention behind his dream is stated on internet.org’s home page: “Making internet access available to the two thirds of the world not yet connected.”

Facebook (Nasdaq: FB) wants to increase its subscriber base and inch closer towards web domination.

Facebook knows that only 1 billion of the earth’s 7 billion people currently have mobile phones, but 80% of the rest of the population lives within areas covered by 2G or 3G mobile web access.

Every tech company knows that data means power.

Facebook purchased WhatsApp for $19 billion not because of its 55 employees, but because of its 450 million (older or aging) users.

Facebook just celebrated its 10-year anniversary and may feel too old, too old for the future. According to Zuckerberg, WhatsApp will make Facebook more attractive for younger users.

WhatsApp is the biggest acquisition since AOL and Time-Warner in 2001. To put this into perspective, Facebook paid $345 million per WhatsApp employees and $42 per WhatsApp user.

That’s a lot of money, but to add one more perspective, Facebook shareholders currently pay $141 per registered Facebook user.

Facebook sent a clear message: It wants to dominate the internet, but it is not alone.

Google’s Race for Web Domination

Google’s Android is the world’s most popular smart-phone/table OS. Google wants to extend the reach of Android into other areas, like home, auto and healthcare as the acquisitions of Nest and Boston Dynamics (producer of military robots).

No other tech company is as diversified as Google (Nasdaq: GOOG).

Apple’s Race for Web Domination

Apple (Nasdaq: AAPL) used to be known for devices like the Mac and iPad. It briefly dominated the digital market with apps, but that’s no longer enough for web domination.

Apple is looking for the next big hit. Possibly in cooperation with Tesla?

Amazon’s Race for Web Domination

Amazon started in 1995 as an online bookstore. Today Amazon (Nasdaq: AMZN) is a specialist for everything bought and sold digitally.

Like its competitors, Amazon wants to tie users to its platform. Kindle, its own brand of cell phone and packages delivered via drones. Amazon’s founder Jeff Bezos is a visionary without borders.

Facebook, Google, Apple and Amazon make up 27% of the Nasdaq 100 and Nasdaq 100 ETF (Nasdaq: QQQ), so their successes and failures certainly stand to impact the investing masses.

What About Internet for Everybody?

Pre-internet customs such as having dinner with family, talking (actually speaking) to the person standing next to you, and being able to enjoy your favorite pastime without getting interrupted by your boss weren’t such a bad thing either.

But, according to Zuckerberg, “the problem is that those people, who have never accessed the web, don’t know why it might be useful to them.”

Yes, the internet is useful, but it’s not a life-changing force for the better as internet.org would want you to believe.

How will the battle for web-domination effect the stock market in general?

Here is a full 2014 forecast for the S&P 500 NYSEArca: (SPY): S&P 500 2014 Full-year Forecast

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

AMZN Slices Below Key Support – With P/E of 1,403 Downside Risk is Enormous

Investors buy Amazon for its founder’s vision and ingenuity, not because the company is a cash cow. The problem with a ‘vision based investment,’ and a four-digit P/E ratio is immense down side risk once momentum wanes.

Jeff Bezos, Amazon’s founder, is an incredible visionary.

Amazon.com Inc (Nasdaq:AMZN) operates on razor thin profit margins, so investors buying AMZN invest in Bezos’ vision, not a cash cow.

A look at AMZN’s chart (up until January 22) shows that Bezos’ vision trades at a premium. That premium made Amazon the fourth biggest component of the Nasdaq-100 and Nasdaq QQQ ETF (Nasdaq: QQQ).

Amazon also ranks #21 on the list of S&P 500 and SPDR S&P 500 ETF (NYSEArca: SPY) components.

The January 5 Profit Radar Report featured this little piece of financial trivia:

Which high-flying tech leader has a P/E ratio of 1,403? Tip: This stock is the fourth biggest component of the Nasdaq-100. Answer: Amazon (AMZN). Amazon founder Jeff Bezos is a true visionary and Amazon is working on amazing technology, but ultimately earnings are more important than pure vision.”

Featured along with the trivia was the first chart below and this warning:

Near-term support is around 380. A close below 380 would open the door for much lower targets.”

I’d like to point out that the Profit Radar Report doesn’t customarily feature single stock analysis (most analysis is based on the S&P 500), but every once in a while it looks at stocks too ‘bubbleicious’ to ignore.

Those stocks included Apple (September 12, 2012 Profit Radar Report) and Tesla (August 31, 2013 Profit Radar Report) and now Amazon (and one other high-flying stock).

The second chart zooms in on Amazon’s more recent performance.

AMZN gapped below 380 last Friday and lost as much as 15% since January 22.

Based on Amazon’s sky-high P/E ratio, the down side risk is quite enormous. The key level for Amazon shorts is 380.

The Profit Radar Report identified one other high-flying tech name that looks too ‘bubbleicious’ to ignore. Unlike AMZN, it still trades within a few percent of its all-time high. It also just reached its up side target and sports a lot of down side risk.

Sunday’s special edition of the Profit Radar Report profiled this short-term trade along with a longer-term forecast for the S&P 500 (PS: If you are thinking about signing up for the Profit Radar Report, keep in mind that it is not a stock picking service).

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

AAPL, GOOG, AMZN and MSFT – Tech Sector Giants Turn Laggards

It’s said that a fractured market is an unhealthy market. The reverse is true and based on the recent string of index highs the market appears healthy. However, some former tech giant leaders are starting to wane. What does this mean?

The S&P 500 and Dow Jones eeked out a new all-time high this morning, the S&P MidCap 400 recorded a new all-time high last Thursday. The Russell 2000 came within 0.08% of a new all-time high. The Nasdaq Composite recorded a new recovery high on Thursday while the Nasdaq-100 remains below last years recovery high.

On the surface the string of new highs/recovery highs is bullish and shows that the major indexes are firing on all cylinders. A humming engine is less likely to stall. However, there are some early issues that may soon illuminate the “check (stock market) engine light”.

While broad indexes remain strong (with the exception of the Nasdaq-100), individual stocks are showing signs of fatigue. In fact, prior tech giant leaders are turning into laggards.

Google (GOOG)

The February 12 article “Will Google Continue to Climb?” highlighted the dashed green support line and support at 760 and stated that the rally will continue as long as prices remain above 760 or dashed green trend line support.

Google broke below support in mid-March and now trades nearly 5% below its all-time high. The 50-day SMA is at 788 and should offer some support.

Apple (AAPL)

We all know about AAPL’s historic ascent and decline, but last week it appeared as if AAPL could stage a small comeback. The log chart shows a brief break out above the down hill parallel channel followed by a bearish relapse. A close below the 20-day SMA at 442 could unlock much lower prices (a shockingly low possible target was just revealed in last night’s Profit Radar Report).

Amazon (AMZN)

Amazon’s chart doesn’t offer any particular insight from a technical analysis perspective, but we take note that AMZN is more than 6% below its all-time high already.

Microsoft (MSFT)

Microsoft has been stuck in a 13-year trading range. MSFT just hit a year-to-date high, but is well below its 2012 high, which incidentally occurred in April.

Summary

It’s said that a fractured market is an unhealthy market. Aside from the lagging Nasdaq (primarily caused by Apple), there are no obvious fractures on the broad market index level.

The waning leadership within the large cap sector though is an early warning sign. The S&P 500 is not far away from key resistance (price target) and key support. A move to hit resistance or below support will be a sell (as in go short) signal.

Last night’s Profit Radar Report featured a specific rally target and the must hold support.

AMaZiNg – 3,893 Tech Sector P/E Ratio Is Back

Quadruple digit P/E ratios – like 3,893 – were thought to be in the past. Courtesy of America’s premier online retailer we just got a flash from the past. Does that mean it’s time to party like it’s 1999?

Triple and quadruple digit P/E ratios of the late 1990s are fond memories for some and nightmares for others.

Regardless of your memories, the fifth largest component of the Nasdaq-100 just hit a P/E ratio of 3,893. Who is this ‘bubbleishous’ tech stock? Amazon.

Talking about nightmares, Amazon has become a nightmare to brick-and-mortar retailers. Amazon is spending tons of cash to make sure Amazon’s e-commerce site haunts brick-and-mortars day and night.

As the chart below shows, Amazon’s revenue (green columns) has grown steadily, but net income has taken a hit as profits are reinvested into new warehouses, called ‘shipment hubs.’

In 2012, Amazon added 20 shipment hubs, which decreased shipment costs from 4.5% of sales to 5.4% of sales (about $430 million).

Amazon’s gross margins widened from 20.7% to 24.1% and investors applauded the aggressive expansion, sending AMZN to an all-time high.

AMZN accounts for only 1.02% of the SDPR S&P Retail ETF (XRT), nevertheless, XRT is also trading at an all-time high.

Does this validate a P/E ratio of 3,500+ though? It’s a classic scenario of ‘mind over matter.’ As long as investors don’t mind, it doesn’t matter.