Microsoft, Apple, Amazon, Facebook – large-cap growth stocks had been market darlings in recent weeks, but their performance has broken down – at least from a technical perspective. That could be a cue for bulls to tread with caution, according to All Star Charts Institutional’s Top 10 Charts of the Week.
“Last week we alluded to many of the ‘triple tops’ we were seeing in the major US indexes and how we thought it would be healthy for prices to consolidate further before attempting to break out,” All Star Charts wrote in a client note. “Unfortunately, we didn’t get that consolidation and prices exceeded their former highs as momentum diverged, quickly reversing lower. The confirmation of this failed breakout skews the risk to the downside and suggests that taking profits on longs and putting on shorts makes the most sense. In a rangebound tape, we were buyers down near support and therefore should be sellers up near resistance, positioning ourselves in a way where our risk is well-defined and we can ‘see what happens’ from current levels. We used the Russell 1000 Growth Index to illustrate this because large-cap growth has been one of the strongest areas of the market, so if it is struggling to sustain new highs then it’s unlikely other areas of the market will be able to either.
Read the full Top 10 Charts of the Week here. For information about how to subscribe and receive the charts Wednesday, two days before before they publish on IPO Edge, contact All Start Charts Institutional Sales.