Tech mega-caps highlight the last big reporting week of the fourth quarter earnings season, with Amazon.com Inc. (AMZN), Alphabet, Inc. (GOOG), and Alibaba Group Holding Ltd. (BABA) stepping to the plate. It’s a dangerous time for shareholders of these equity superstars, with market sentiment deteriorating at a rapid pace, following mind-boggling short squeezes on some of the U.S. market’s most downtrodden public companies.
FAANG members Apple Inc. (AAPL), Facebook Inc. (FB), and Netflix Inc. (NFLX) have all turned lower despite beating fourth quarter top and bottom line estimates, substantially increasing risk for GOOG and AMZN shareholders. Big investors getting margin calls could be driving this downturn, with losses incurred on high short interest small caps forcing involuntary liquidation. Main Street investors are also hitting the exits, worried that last week’s bizarre events will mark a major top.
Amazon is expected to report a Q4 2020 profit of $7.00 per-share on $119.6 billion in revenue. The stock posted an all-time high at 3,552 in September and eased into a symmetrical triangle, with support near 2,870. It’s traded within this classic pattern for more than four months now, wobbling back and forth across the 50-day moving average. Unfortunately, monthly relative strength readings are still forecasting lower prices, raising odds for an eventual breakdown.
Analysts are looking for Alphabet to post a Q4 2020 profit of $15.99 per-share on $52.9 billion in revenue. The stock broke out above the September high at 1,733 in November and tested new support into January, when it broke out once again and posted an all-time high at 1,934. It’s now pulled back to support near 1,800, raising odds that a strong quarterly report will generate a fresh trend advance to new highs.
Finally, look for Alibaba to report a fiscal Q3 2021 profit of $20.94 per-share on $214.4 billion in revenue. The stock failed a rally above the 2018 high at 211 in February 2020 and recouped those losses into a July breakout that hit an all-time high at 319.32 in October. Many shareholders have jumped ship since that time, dropping accumulation to 18-month lows. It’s now hovering at the 200-day moving average and could roll over after this week’s confessional.
For a look at all of today’s economic events, check out our economic calendar.
Disclosure: the author held no positions in aforementioned securities at the time of publication.