FAANG stocks continued to act bullishly Thursday with a majority of the five big-cap techs showing gains of 1% to 2% or more as Wall Street continued to respond positively to earnings growth in the internet, leisure and consumer spending sectors. Meanwhile, Visa also rose rapidly and took out an aggressive entry point at 125.54 as well as a 126.98 standard entry within a nearly 12-week flat base.
Facebook (FB) was the best FAANG stock Thursday, soaring 9% and leaping back above the 50-day and 200-day moving averages. The stock is building a new base, which could set up a fresh breakout to new highs and significant price gains for investors who use charts to perfect their market timing.
Institutions are rushing back into the megacap internet content play after the Menlo Park, Calif., firm posted strong earnings (up 63% to $1.69 a share) and revenue (up 49% to $11.97 billion) after the close on Wednesday. The social media network’s after-tax margin leapt 360 basis points to 41.7%, likely the highest for any first quarter since the company went public in May 2012.
The Nasdaq, up 1.5% in afternoon trading, still stood head and shoulders above the 1% gains for the S&P 500 and the Dow Jones industrial average. The S&P SmallCap 600 underperformed, rising just 0.2%. At 7111, the Nasdaq composite is down 0.5% for the week but has now moved up 3% year to date. It advanced 28.2% last year.
In the stock market today, volume rose mildly on both main exchanges vs. the same time on Wednesday.
The Dow industrials’ biggest winners included Visa (V), Home Depot (HD), UnitedHealth (UNH) and McDonald’s (MCD). They are among 10 of the 30 components that coasted ahead 1 point or more. Visa’s flat base shows a regular buy point of 125.54.
What To Do About Facebook Now
Those who wish to buy Facebook shares at the right time may want to first see if it can hold the bullish price gap created on Thursday. Facebook’s intraday low of 170.80 is above the previous session’s high of 161.06, thus producing the bullish price gap.
On March 19 and 20, Facebook shares dropped hard, taking out the Feb. 9 near-term low of 167.18. A few weeks later, the stock got as low as 149.02. This big undercut of the first low means that a double bottom base could be in the works. If that’s the case, the emerging buy point would be 10 cents above the middle peak in between the first and second low, or 186.20.
Visa, the credit and debit card transactions giant, reported strong earnings of $1.11 a share in the March-ended fiscal second quarter, nearly 9% above the Thomson Reuters consensus estimate. Revenue accelerated 13% to $5.07 billion.
Look For Relative Strength
As seen in an IBD daily chart, the blue-colored relative strength line of Visa is jetting into new high ground. A rising RS line, which is separate from IBD’s Relative Price Strength Rating, means a stock is outperforming the S&P 500.
Alphabet (GOOGL) was initially up the least among the five FAANG stocks, just 0.4% at the start, but shares are now outperforming the Nasdaq, up 1.9%. Netflix (NFLX) powered up more than 2.6% as shares are finding bullish support near its fast-rising 50-day moving average.
Netflix is a member of IBD Leaderboard. Senior markets writers and editors annotate the daily and weekly charts of Leaderboard stocks to help IBD readers pinpoint buy points, sell signals, follow-on entry points, and significant moments in the chart action that underscore a stock’s strength or weakness.
On Thursday the midcap stock and member of IBD’s ship transport industry group rallied as much as 10% past a new first-stage base.
The Dow transports are down 1.1%, hurt by big sell-offs in truck transport and logistic stocks. Airlines edged higher.
FAANG Vs. FANG
Apple (AAPL) is trying to keep its correction mild even though Thursday’s initial rally lost steam. Shares edged up 0.4% to around 164. The stock had already ramped up 55% after breaking out of a cup with handle at 118.12 on Jan. 6, 2017.
The iPhone giant is slated to post fiscal Q2 results on May 1 after the close. Analysts on consensus see earnings rising 28% to $2.69 a share. That would mark the highest year-over-year increase since the fourth quarter of fiscal 2015 (ended in September).
In IBD Stock Checkup, Alphabet scores an 83 Composite Rating on a scale of 1 to 99, with 99 the best possible. The Google search engine owner has become a laggard with a small loss since Jan. 1. Earlier this week, Alphabet posted a 28% rise in Q1 earnings to $9.93 a share, matching the 28% increase in Q4.
Buy Alphabet? Or Watch For Now?
Alphabet is holding its own around the 200-day moving average, but is around 13% below its all-time peak of 1,197. Watch to see if the stock can muscle back above the medium-term 50-day line; that would signify renewed strong institutional demand.
Netflix, which is trading just 7% off its 338.82 high, holds a top-notch 99 Composite rank. The Street sees the video streaming giant’s earnings bolting 129% higher this year to $2.86 a share.
Netflix has 435 million shares outstanding, while Alphabet has a total 695 million shares across all of its share classes.
The Innovator IBD 50 (FFTY) ETF, up 34% in 2017, jumped 1.9% to 33.06 following bullish support at the 200-day moving average. The exchange-traded fund is down fractionally in 2018.
Watch for more quarterly results after the close, including Starbucks (SBUX), First Solar (FSLR) and Western Digital (WDC). For a complete schedule, see IBD’s Earnings Calendar, found in the Research section at Investors.com.