Will FANG take an offer?
By David Fajardo
Editor’s Note: All references to time frames longer than one trading day are for market context purposes only and not recommendations of a holding time. Daily rebalancing ETFs are not meant to go unattended for long periods of time. If you don’t have the resources, time, or inclination to constantly monitor and manage your positions, leveraged ETFs aren’t for you.
As inflation continues to rise and fears of an impending recession take hold, market sentiment has turned pessimistic in recent months and CROC Stocks – Facebook, Amazon, Apple, Netflix and Google – were among the hardest hit, collectively falling nearly 37% compared to the 16% drop in the S&P 500.
Even so, some traders are still optimistic that the fall is not permanent, as these high-growth stocks have the means to recover from what could be a market overreaction – as long as they are ready to. Prepare for tougher privacy and consumer protection regulations. who could be headed their way.
Social media companies hit by privacy lawsuits
At the end of May, the Federal Trade Commission (FTC) fined Twitter $150 million2 for selling users’ phone numbers and email addresses to advertisers after telling users the data would only be used to secure their accounts.
The hefty fine comes just months after Facebook agreed to a $90 million3 settlement with users who sued the platform’s facial recognition software for using auto-tagging to identify people in photos.
Similarly, Snapchat was the subject of a class-action4 lawsuit in May for unlawfully collecting users’ biometric data, including facial features and voice – a privacy breach that could result in penalties of up to $5,000 per breach per user.
High settlement costs sweeping social media could put near-term downward pressure on these stocks. Merchants need to pay attention to how these companies rework their business models and restore their brand reputation. Those with good pivot plans in place are likely to see the strongest rallies over the next few months.
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Google’s piecemeal rollout of an Apple-like ecosystem could bring new growth opportunities
Google has a lot of money and is using that money to invest in building an ecosystem similar to Apple5 which it calls Better Together.
Although it’s been quietly adding ecosystem-like features to its Android and Chrome operating systems for years, it’s now heading to the finish line with major updates and new software features set to launch. expected every few weeks or months until the rest of 2022 – all of which could become tradable bulls for its shares and those of the companies that make products for this ecosystem.
Signs point to Netflix Plunge being an overreaction
After losing 200 million subscribers and announcing massive layoffs, Netflix’s stock fell 63%6. This is one of its biggest losses yet, but there are signs that the price is near its lows with analysts bullish on its recovery.
The reason this might be the drop worth buying for Netflix: The company’s earnings arguably don’t match the sharp drop in the stock price. Netflix actually posted 10% revenue growth in the first quarter. It also recorded an increase in free cash flow7.
Additionally, the acquisition of Boss Fight Entertainment and Next Games, which is expected to be completed in the second half of 2022, could signal the company’s move into gaming. This could be the start of a smart move to improve the customer loyalty and to increase subscription prices by bundling its video-on-demand service with other entertainment.
For bullish traders, anything could point to an early indication that the stock has bottomed out and is ready for a near-term rebound.
Magnify bullish swings with Direxion’s FNGG ETF
CROC stocks have earned their reputation as high-growth stocks for a reason, and with many of these companies boasting healthy cash reserves and a track record of innovation, there could be plenty of potential rebounds to look forward to. In the coming months. However, market sentiment remains volatile – bordering on panic8 according to some analysts – and could therefore react strongly to any bad news, no matter how small.
With that in mind, strategy is more important than ever, and finding ways to maximize every bullish trade you make will be key to offsetting periods of bearish weeks without many viable trades.
One possible way to do this is with the Direxion Daily Select Large Caps & FANGs Bull 2X ETFs (FNGG). FNGG aims for daily investment results, before fees and expenses, of 200% of the performance of the ICE CROC 20 Indexes. While this means losses are magnified just as much as gains, it is a useful way for those with a strategy in place to turn smaller swings into more profitable trades.
The ETFs follow the ICE CROC 20 Index, which is an equally weighted index of 20 large-cap stocks, including all CROC shares. As of 05/31/2022, the 10 main securities of the index by weight are:
- Crowdstrike Holdings Inc. (NASDAQ: CRWD) – 6.67%
- Tesla Inc. (NASDAQ: TSLA) – 6.10%
- Nvidia Corp. (NASDAQ: NVDA) – 5.91%
- Snap Inc. (NYSE: INSTANTANEOUS) – 5.87%
- Amazon.com Inc. (NASDAQ: AMZN) – 5.78%
- Datadog Inc. (NASDAQ: DDOG) – 5.50%
- Alphabet Inc. (NASDAQ: GOOGL) – CI A – 5.45%
- Apple Inc. (NASDAQ: AAPL) – 5.30%
- Microsoft Corp. (NASDAQ: MSFT) – 5.26%
- Advanced Micro Devices Inc. (NASDAQ: AMD) – 5.08%
Watch for acquisitions, product and software launches, and other innovation news from these companies throughout the year. Then, clearly define your entry and exit points and keep your finger on the trigger to try to end each trade before the roller coaster market goes down.
For more news, insights and strategy, visit the leveraged and reverse channel.
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