Is It Finally Time For A Contrarian Trade, And Are The FAANG Stocks Back?
Jani Ziedins | Apr 02, 2021 02:58AM ET
The S&P 500 surged to record highs and closed 20 points above the psychologically significant 4k level. It’s taken a few weeks, but we finally did it.
Wall Street brokers are already handing out the 4k hats. While that sounds like the perfect invitation to make a contrarian bet, only fools trade against something for no other reason than it looks “too high”. Before giving up on this bull market, we need a concrete and compelling reason to stop going along with this strength.
Without a doubt, this 4k breakout could be the beginning of the end, but the very first thing that needs to happen is for prices to stall and retreat. The very most important part of that sentence was “retreat”. Until stocks actually retreat from these levels, there is nothing to do but keep holding for higher prices.
A lot of people got out prematurely at 3,600, 3,700, 3,800, 3,900 and now 4k because stocks are “too high!” The thing these people forgot is “too high” often ends up going even higher.
Never bet against a market that keeps making new highs. Until we start getting a series of lower-highs and lower-lows, this bull market is alive and well and there is only one way to trade this.
The S&P 500 broke through 4k and the FAANG stocks came back to life! It’s hard to say who is leading who, but the most important thing is both are finally working together. As long as the FAANG stocks keep this newfound strength, expect the indexes to continue pushing higher.
Of the group, Facebook (NASDAQ:FB) and Google (NASDAQ:GOOGL) are clearly the best and either at highs or very close to them. That said, the FAANG laggards often catch up and that means we shouldn’t give up on Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), and Amazon (NASDAQ:AMZN). In fact, there is more upside in betting on these catching up than chasing FB and GOOGL near the highs.
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