FAANG stocks are investor darlings. Four of them are considered sexy — they have cool products, brainiac CEOs or California-style innovation. But one is not like the others. And herein lies an opportunity for astute investors.
The masses love Apple’s AAPL, +0.63% iPhones, and hardly anyone cares about Google’s GOOG, +0.60% GOOGL, +0.54% Facebook FB, +0.96% is getting a massive amount of criticism from Russians using its platform to influence the U.S. election. The Russians also used Google’s platform, but not many care. Original productions at Netflix NFLX, +1.32% gain a lot of attention, while the extraordinary performance of Google’s YouTube is ignored. Finally, consumers spread their love for Amazon AMZN, +0.31% as they increasingly buy products online, though they use Google search more often than they buy from Amazon.
In short, there is no love for Google.
Let’s break down this stock, which has risen 7% or 8% (depending on share class) since Sept. 25. Of the FAANG stocks, only Netflix has done better, at 10%.
Before we review a chart on Google, here are the FAANG stocks’ returns for this year, courtesy of Pension Partners’ Charlie Bilello. You’ll see that Google lags behind for all of 2017:
— Charlie Bilello (@charliebilello) October 13, 2017
Please click here for an annotated chart of Google. Note the following from the chart.
• The price is beginning to break out.
• RSI (relative strength index) shows there is more room to run.
• The rally is on low volume and for this reason poses risk.
The traditional technical analysis does not work as well as it used to. This is an important concept for investors to understand. Please click here for more insights.
Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.
Gain an edge
Please click here for a chart of money flows in FAANG stocks as well as popular stocks including AMD AMD, +0.21% Alibaba BABA, -0.95% Microsoft MSFT, +0.39% Nvidia NVDA, +1.81% and Tesla TSLA, +0.12% Please see “This is the one stock to buy if the stock market crashes.”
A valuable technique for investors is to look at money flows instead of volume only. This is a good way to gain an edge in the markets. At The Arora Report, we focus on three kinds of money flows that have proven to provide the most predictive power. The three important money flows are smart money, momo (momentum) and short squeeze.
Please click on the chart of money flows linked above to see the relative ranking of the five FAANG stocks. Google’s stock (though officially Alphabet’s) has just now moved up in rank from four to three, according to the proprietary algorithms at The Arora Report. This rank takes into account fundamentals, quantitative factors, sentiment, money flows and proprietary technical factors.
What to do now
At The Arora Report we provide separate guidance for conservative, growth and aggressive investors. We also provide buy ratings and specific buy zones, target zones and stop zones. Only aggressive investors may consider starting a small scale in with tight stops at this time in Google stock. Conservative and growth investors may want to wait for either a dip into the buy zone or a confirmation of the breakout. The reason is explained in “Six similarities between now and 1987, when the Dow plummeted 23% in one day.”
For more breakouts, please see “This Dow company is ready to go all-in against Amazon” and “A breakout in this cheap, forgotten stock is powering the Dow Jones Industrial Average.”
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. All recommended positions are reviewed daily at The Arora Report.
Nigam Arora is an investor, engineer and nuclear physicist by background, has founded two Inc. 500 fastest-growing companies, is the developer of the adaptive ZYX Global Multi Asset Allocation Model and the ZYX Change Method to profit from change in trading and investing. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.