Cramer: Does Your Portfolio Have FANGs?
If you're looking to invest in technology Cramer has a few simple rules.
"Put money to work in the companies that represent the future," he said. "Put money to work in companies that are totally dominant in their markets, and put money to work in stocks that have serious momentum."
Sounds easy. Of course, it's not.
Therefore, in an effort to identify these kinds of companies Cramer went off the charts with top technical analyst Bob Lang, a Cramer colleague at RealMoney.com
"These stocks have the potential to really take a bite out of the bears," Cramer said. And for that reason Lang has nicknamed them FANG stocks.
Following is the analysis:
Looking at the daily chart of Facebook, Lang sees a lot of noise and volatility although he said there's an important floor of support for Facebook at $28 and a ceiling of resistance up at $32, a range that makes Lang think the stock would be ripe for the picking on a pullback to $28.
The really bullish picture for Facebook, though, is the weekly chart.
Facebook has made what's technicians call a 'cup and handle formation', which is a cup-shaped bottoming pattern followed by a brief period where the stock trades down in a tight range that looks like a handle.
Lang thinks it's a very positive development, because it's among the most reliably bullish patterns out there. Once the stock breaks out from the handle, which Facebook did about a month ago, he expects a sustained move higher.
Lang believes this long-term move is just beginning. It could be enough to propel the stock above the ceiling of resistance at $32, and once Facebook jumps that hurdle, there's very little standing in its way from a technical perspective.
Looking at the daily chart of Amazon, it may be best to wait for a pullback. Lang says the stock looks to have stalled out after initially roaring 10% past the neckline of a so-called inverse head and shoulders formation.
Also, looking at the Moving Average Convergence/Divergence line or MACD, a momentum indicator that technicians use to detect shifts in a stock's trajectory, Lang said he's seeing a sell signal.
However, if we do get a sell-off in Amazon, Lang thinks that it will likely just be a brief pullback.
Looking at the weekly charts, Lang sees a strong floor of support around $250. And he added that the stock has a powerful uptrend line that's nowhere near being broken. With Amazon, Lang thinks the ideal move would be to wait for a pullback to $250 and then start buying.
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Looking at the daily chart of Netflix, Lang sees what's known as a 'bullish pennant pattern', something he considers incredibly positive.
A pennant is what you get when, after a huge move higher, a stock starts to zigzag, creating a sort of triangle that looks like, well, a pennant on top of a flag-pole.
Pennants are continuation patterns and Lang believes if Netflix breaks out of this triangle, it should resume a long march higher.
Lang added that Netflix made a very similar pennant formation in November, and over the next six weeks the stock rallied about 20 points higher.
Lang also points out that the so-called Williams oscillator looks very similar to 2011, at a time when Netflix rallied up to $300.
However, it's also worth noting that Netflix just had a gigantic run, and Lang thinks it might need to trade sideways and digest that move for a bit, even though he thinks long-term the general direction for this stock is higher.
On Friday Google made a new all-time high at $776, and Lang points out that we often see stocks tack on an additional 10% move after the first time they make a new historical high.
He added that although Google appears to be overbought, however it's been staying at overbought levels for an extended period of time. When that happens, Lang says typically the stock will remain overbought and continue to rally.
What's the bottom line?
If you're looking to play tech, think FANG, Bob Lang's acronym for Facebook, Amazon, Netflix, and Google. All 4 names appear to be turbocharged momentum stocks that could have a lot more room to run according to Lang's chart work.
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