Wed, April 27, 2022 | 6:21PM ET

Apple and Meta-Platforms Technicals

Name: FS Insight
Price range: $$$

Mark L. Newton, CMT ^AC

Head of Technical Strategy

Key Takeaways

Minor stabilization occurred Wednesday and more might be in store given FB’s after-market lift. Overall, this bounce should prove temporary for US equity indices.
Key for AAPL and MSFT will be holding above March lows ~ 150 for AAPL.
Heating oil surge to new highs is following-through given huge inventory drain.

Equal-weighted SPX hits highest vs SPX in over a year

A minor bounce might continue a bit more into Thursday/Friday, as FB’s positive after-hours lift has successfully recaptured March lows (As of 5:30pm EST in After-market trading). However, trends and momentum remain negatively sloped for US indices, and bounces should lead to selling opportunities back down to test February lows, in all likelihood, which might begin next week. Daily charts of S&P’s front month Futures contract illustrate the minor bounce attempt on Wednesday as part of the very severe downtrend from early April. White lines have been drawn to show support and resistance for this recent price action, and this looks to be a very tricky spot for a high conviction play in either direction with prices down near March lows. Above 4240 would lead to 4300-3 with a maximum push to 4350. Meanwhile any loss of 4157 would be very negative and lead back down to support near 4100. Volatility is expected to persist into May.

Technical Thoughts on Meta Platforms (FB-$174.95)

Let’s delve further into the “FAANG” analysis today with some technical thoughts on FB.

As weekly charts show below, FB has proven to be one of the hardest hit of any of the Large-cap Technology names that make up “FAANG”. Both FB and NFLX have dropped more than 50% off recent highs from last Fall while others like AAPL, MSFT, TSLA, GOOGL have proven relatively more resilient.

Specifically with regards to FB, the following seem to be pertinent technical points:

Post-market lift after Wednesday’s earnings on 4/27 has helped to carry FB back up above March lows in the After-market, but it’s premature to make too much of this until a full day of trading and preferably weekly close back above has occurred.

The stock remains within its bearish downtrend following the breakdown last December, which proved to be the initial warning of this sharp 18-month rally giving way.

Momentum has been technically oversold since March, and has begun to show positive divergence (Momentum holding up despite the recent weakness under March lows at 185).

FB has sold off since last Fall to retrace more than 61.8% of the rally off 2020 lows, which keeps this stock in a very weak spot technically.

Normally prior peaks such as 2018 along with early 2020 peaks tend to be meaningful support on retests but failed to hold this stock during February 2022’s downward acceleration.

From an Elliott-wave perspective, one can make the case that the open gap lower on 2/3/22 was a potential wave 3 decline. Now that March lows at $185 have been violated, this likely represents the “final” pullback from last September peaks before a meaningful low occurs.

DeMark indicators remain at least 4-5 weeks away from showing confluence on a weekly basis regarding a potential low. Given the extent of the weakness over the last seven months, it’s likely that this should line up before any type of meaningful low materializes.

Overall, FB does not yet look attractive to buy dips technically despite Wednesday’s post-market bounce attempt, and the recent drawdown has proven exceptionally severe. While positive momentum divergence has begun and FB is oversold, this has not stabilized sufficiently nor shown any strength to warrant this starting a meaningful rally.

Until signs of counter-trend signals of exhaustion emerge, and/or this gets closer to 2020 lows (which would be a meaningful area of support) it’s likely wrong to expect much of a bottoming process until late May/June for FB.

While many view this stock fundamentally as being an exceptional value at current levels, technicals do not line up yet as being “there” to suggest this is bottoming. Movement down below $165 into late May would alert me to a greater potential for FB to bottom out technically. At present, this looks premature, and a bounce is not expected to exceed early April highs at $236.86.

Apple showing tremendous strength relative to its “FAANG” peers

Interestingly enough, while the “FAANG” Generals have begun to slowly retreat, as 3 of 4 thus far have turned out disappointing Earnings results, AAPL remains quite resilient ahead of its own earnings. Despite a 10% drop thus far in the month of April, AAPL has not violated key support and remains a stock to consider buying on weakness.

Given the huge representation of AAPL within the SPX and QQQ, this stock along with MSFT remain hugely important, technically speaking. In the weeks/months to come, it will be important for AAPL to remain above $150, which lies near an almost one-year area of trendline support.

This weekly chart below will be important to monitor in the weeks/months ahead as this trendline undercutting former lows extends back to Fall 2020. Breaks of March lows just above $150 will be quite important and negative for AAPL and it’s thought that any violation of March lows in both AAPL and MSFT would bring about a “final” capitulatory move down to $138 which lies near last Fall’s October lows.

At present, AAPL is attractive to consider buying dips after having fallen 10% as its risk/reward profile is attractive with the stock hovering just above key support at $150.

Heating Oil surges to new All-time Highs

Finally, it’s worth noting that Ultra-low Sulfur Heating oil has quietly pushed back to new all-time highs in the last week given Russia’s invasion of Ukraine and subsequent drop-off in inventories to the lowest levels since 1996. Front month Diesel futures have pushed back above 2008 highs to the highest levels since 1986 and backwardation has reached the widest on record ahead of Friday’s expiration.

Open interest has plummeted while liquidity has dropped off sharply which is also helping to contribute to the recent volatility. Technically speaking, while quite overbought, this recent breakout back to new highs doesn’t look to be something to try to fade right away. Further gains look likely in the short run, but gains into May likely prove to be something to sell into at $4.50-$4.75 on further gains (Generic contract), but the current soon to expire front month futures could hit $5.00 before much resistance.

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Mark L. Newton, CMT, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships. Neither I, nor a member of my household is an officer, director, or advisory board member of the issuer(s) or has another significant affiliation with the issuer(s) that is/are the subject of this research report. There is a possibility that we will from time to time have long or short positions in, and buy or sell, the securities or derivatives, if any, referred to in this research.

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