Zak Mir’s U.S. New Economy Giants Blog: Apple and Facebook
At the beginning of the year, 2014 was labelled as many things as far as the financial markets were concerned, with most of them being bearish. One could argue that in many ways it has been worse than expected on both a fundamental, and especially geopolitical, basis.
The big Black Swan initially was of course Russia / Ukraine, while ISIS / Iraq and Gaza have added extra horrors. However, it would seem that in a world of QE and ultra low interest rates we are essentially immunised against all but the end of the world – so even Ebola hardly makes a dent in sentiment.
Nevertheless, this has not prevented the bears from trying to bring down the House of Cards that presumably most of them regard the equity markets as being. They did enjoy a decent ride to the downside in January, and now again at the start of August. But so far these have been dips to buy into. Waiting for everyone to get back from their holidays in September may actually be the best opportunity they have to give stocks a proper kicking.
In the meantime though, one of the main phenomena that the bears have been able to point to in order to back up their notion that equity markets are in a bubble has of course been the U.S. new economy. This is on the basis that we are heading for Dotcom Bubble II.
While they may very well be correct eventually, in the meantime we have been treated to a rally of such proportions for the Nasdaq, it really has been almost embarrassing to suggest anything negative, whether fundamental or technically, on many of the leading lights. Even Twitter (TWTR) managed to rebound sharply after its latest trading update at the end of July.
Apple
For the purposes of this exercise it is all about the giants and all about the bulls runs. In the case of Apple, which is currently in the run up to the iPhone 6 launch on September 9th, there is clearly a significant amount of speculation associated with this fundamental event. On the technical side we see how the January gap to the downside was the big bear trap to start the year, and it has been essentially up, up and away ever since.
The vehicle for the rise is a rising trend channel drawn from as long ago a October. The support line of the channel currently runs level with the 50 day moving average at $94.25. This would imply that at least while there is no end of day close back below the 50 day line / 2013 support line we should give the benefit of the doubt to the bull argument. The best case scenario on offer here seems to be the top of the channel’s resistance line projection currently pointing as high as $108 for the end of September.
If anything, it can be said that the new economy stock which has confounded the bears more than all others is Facebook. This has continued to be the case even after the social media pioneer assured the market on its mobile revenues in early 2013, and even after “wasting” money on Whatsapp to the tune of $19bn. This latter was actually a masterstroke as by valuing Whatapp so highly the overall value of Facebook is underpinned in turn for the future.
As far as the charting position here is concerned we are looking at the price action of the shares holding wholly above the 200 day moving average (currently at $60.83) for well over a year – something which suggests a supercharged bull run. On this basis one would not feel shy about pencilling in a top of September 2013 price channel target as high as $100 by the end of 2014. The added plus here is that the preferred stop loss is an end of day close back below the 50 day moving average (at $68.23), which represents decent risk / reward given the notional upside.
CLICK THE IMAGE BELOW TO GET ZAK’S TOP 5 CURRENCY PICKS FOR H2 2014
Comments (0)