FANG stocks- Facebook, Amazon, Netflix and Google-parent company Alphabet- are flashing red, analysts at Bank of America Merrill Lynch said.
The four stocks, the most popular on the market, are wobbly following recent reports the government is to institute antitrust probes against major tech companies.
An analyst at the bank has said that the top stocks have formed a precarious “head and shoulders” chart pattern, the same one as that seen before last year’s stock market collapse.
The chart tracks FANG performances against the broader S&P 500 beginning December 2017. On Wednesday, Bank of America Merrill Lynch chief equity strategist Stephen Suttmeier said that the stocks have dropped into a pattern seen in early October last year.
The FANG stocks “[broke] below a short-term uptrend” that came after they formed “a head and shoulders top.” Suttmeier notes that this pattern ended with equity market correction witnessed late last year.
According to the analysts, the last few weeks have painted a similar pattern where there is a “head and shoulders top on FANG.”
That pattern is again supported by a comparable breakdown in the S&P 500, which the analyst says confirms a potential pullback for the S&P 500.
The ‘FANG’ stocks’ latest “head and shoulders pattern” has formed over the last three months, coming after the stocks jumped to a new high in March. April saw them hit higher highs and then lower highs towards the end of May.
Suttmeier’s belief is that the pattern’s return is an ominous signal of a potential pullback for the rest of the stock market.
Facebook and Alphabet stocks slipped on Monday with investor concern sending the companies’ respective shares down. The two dropped more than 6%, while Amazon’s shares fell 4%. Netflix shares dropped 2%. In total, nearly $130 billion was wiped off the FANG group’s market valuation.