It is no secret that I like how Dan Nathan thinks … he appears to be one of the most rational traders that CNBC dares show on their daily programming. Dan has been saying for the past several weeks that the recent corrections in the momo, high-beta, over-crowded, super-cap tech stocks are going to be hard to recover from. Dan argues that this would seem to imply that the overall markets are also going to have a hard time making it back to recent all-time highs.
Is Dan right? The basis for Dan’s argument lies in the fact that many traders are trapped in these mega-stocks at much higher prices and will, to a large degree only be too happy to let some stock go if/when these stocks ever get back up to their recent highs. That is what is going to create problems for the market in any bounce from this week’s lows.
Let’s take a look at the volume profiles for the FANG stocks along with AAPL which is going to report its earnings and the all-important Xmas season outlook today after the close. Let’s start with AAPL …
AAPL 65-Minute Chart #1
AAPL is trading right at about $219 right now as I write this … that is equal to approximately the POC generated for this whole corrective period for the market that began in early October. This could almost be expected as AAPL treads water while we wait for the earnings report tonight. The guidance for the Christmas selling season will be an absolute key item in tonight’s report.
AAPL 65-Minute Chart #2
If AAPL were to disappoint tonight, then the bigger support levels on the march up to the 1-trillion dollar market cap should be kept in mind … the $216 – $220 level has been the level where lots of trading has happened since attaining the trillion dollar mark (middle of that range is $218.06).
Lots of trading around that $208 level and then again down around that POC level of $190.62. Volume has a memory on the way up and on the way down … on the way up or back up, most traders will be happy to have the stock getting back to their cost level and many will often take advantage of the pop in price to get out at break-even.
On the way down, those levels show where many traders were lucky enough to have bought previously and many will be happy to load up once again at levels where they last entered the stocks (many will have traded out at a profit, while those who are long-term holders, will think that price is likely to retest the prior highs, so they look at the last levels where they “successfully” bought the stock at).
AAPL 65-Minute Chart #3 – SLOT Resistance
AAPL is right in lower region of the SLOT resistance zone … if the market is still to complete its bigger ABC corrective move to the downside, can AAPL make a big march higher??
Ok … Let’s look at the FANG names now.
FB 65-Minute Chart #1
The October correction has created overhead supply at the $152.70 – $156.82 range.
FB 65-Minute Chart #2
If you look at the c-wave of the October correction, you get an identical POC at $154.72 … the generated range of supply during that time frame that I like to watch is at $153.41 – $156.07.
FB 65-Minute Chart #3
How about the overhead supply created since the last earnings debacle this past summer? The POC is at $174.85.
FB 65-Minute Chart #4
If you look back at the entire trading from the bottom of the early-2018 correction until the low of this week, you get a POC of $160.70. Traders should be able to see in spades what Fast Money’s Dan Nathan is talking about when he states that these FANG stocks are going to have a real hard time making it back up to their previous highs and therefore it is going to be really hard for the overall market to retest their all-time highs again anytime soon.
FB 65-Minute Chart #5 – SLOT Resistance
Knocking on the bottom levels of the SLOT resistance zone …
AMZN 65-Minute Chart #1
AMZN’s POC for this October correction is $1789.26 and the resistance zone is likely to be $1753.92 – $1824.60.
AMZN 65-Minute Chart #2
The last leg lower produces a POC of $1637.45 and a likely resistance zone of $1615.00 – $1660.75 … we are right at the top of this range with today’s trading.
AMZN 65-Minute Chart #3
If you look at the entire trading from the end of the correction in early-2018 to this week’s low, you get a POC of $1832.51 and a likely resistance zone of $1790.06 – $1876.62. AMZN has a lot of wood to chop to get through those big resistance levels!!
AMZN 65-Minute Chart #4
The three big resistance levels created for support on the way up to the all-time high are shown above.
AMZN 65-Minute Chart #5 – SLOT Resistance
Still room for this stock to bounce until the SLOT provides resistance ,,,
NFLX 65-Minute Chart #1
NFLX’s POC for this October correction is $336.46 and the resistance zone is likely to be $329.04 – $343.71.
NFLX 65-Minute Chart #2
The last leg lower which is also from their last earnings report produced a POC of $332.56 and a likely resistance zone of $325.88 – $339.25 … we are right there with today’s trading.
NFLX 65-Minute Chart #3
If you look at the entire trading from the end of the correction in early-2018 to this week’s low, you get a POC of $363.20 and a likely resistance zone of $353.95 – $372.63. NFLX has a lot of wood to chop to get through that big resistance zone!!
NFLX 65-Minute Chart #4 – SLOT Resistance
NFLX feels like a stock that has lost the golden touch and is now being questioned by many institutions about whether an $8billion annual cost for entertainment production makes sense valuation wise.
GOOGL 65-Minute Chart #1
The October market correction has created an overhead of supply in the $1098.10 – $1124.81 zone … after poking into that zone, we have backed-off and the stock is at $1086.65 right now.
GOOGL 65-Minute Chart #2
From its July 2018 all-time high until this week’s low, the POC generated is $1178.81.
GOOGL 65-Minute Chart #3
From the early-2018 low until this week’s low, price and volume have produced a POC of $1080.28, which is right about where the stock is trading today. Prior trading leaves a mark, and in this case, it is trying to act as a level/zone of support.
GOOGL 65-Minute Chart #4
If we look at the march up from the early-2018 correction lows to the July all-time highs, you can see a support zone created at $1010.83 – $1048.52, which is right where support came in here during October.
GOOGL 65-Minute Chart #5 – SLOT Resistance
Bottom Line … I think that Dan Nathan is right when he speaks about the market going to have a real hard time getting back up to its all-time highs anytime soon. There is bound to be lots of distribution in the months ahead, which will create a lot of trading opportunities for the adept/aware traders.
Cheers … Leaf_West