DailyPlay – Facebook Inc (FB) – October 25th, 2021

 View FB Trade

Bullish – FB – $324.61

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Market Outlook:
As we head into earnings season, equities have performed well with the major indices recovering considerably in the last 2 weeks. SPY has rallied back to its previous all-time high at $453 while QQQ ended the week pulling back slightly back to $374. Fundamentals will play a big part this week with 4 out of the 5 FAANG stocks announcing earnings (AAPL, AMZN, FB, and GOOGL). US GDP numbers will also be released on Thursday and will provide additional insight as to how well the economy performed despite headwinds caused by the Delta variant spread, labor shortages, and supply-side constraints. Over the last week, there has been a considerable rotation out of Energy, Staples, and Financials while Discretionary and Tech have seen strong momentum and will likely provide leadership this week.

FB Bullish Trade Idea:
Our bullish trade idea today is Facebook Inc (FB). FB recently pulled back significantly and found support near the $320 level. Price has been under pressure due to SNAP’s disappointing earnings announcement, however, this may be an overreaction when considering that FB and SNAP’s business model is considerably different. Please note that this is an earnings trade with FB announcing earnings today after the market close. View FB Trade

Sector Outlook

The Relative Rotation Graph (RRG) for sector rotation indicates that a broadening sector leadership with 7 sectors in the Improving and Leading categories and 4 sectors in the Lagging and Weakening categories.

Leading (positive relative trend and positive relative momentum): Discretionary, Industrials and Materials. However, only Discretionary showing strong momentum. Weak momentum in Industrials and Materials.

Weakening (positive relative strength and negative relative momentum): Financials and Energy are in the weakening category with poor relative strength and momentum. 

Lagging (negative relative trend and negative relative momentum): Communications and Staples are in this category and continue to experience weak momentum and relative strength. 

Improving (negative relative trend and positive relative momentum): 4 sectors are now in the Improving category – Technology, Real Estate, Utilities and Healthcare which rotated out of the Lagging category on Friday.  

XLV

Healthcare stocks have shown strong momentum this week with the sector rotating out of the Lagging category and into the improving category. Price recently broke above the 100 D MA after a pullback to the $124 area. Look for a continuation of rally back to $236 resistance. 

XLRE

Real Estate recently formed a double bottom at the $44.23 level and bounced higher with strong momentum. Price is currently rallying towards its previous all time high at $48.80. Look for continued rally this week. 

Market Observations

• TSM – Price has failed to break above the 100 D MA on multiple attempts and moved 1.77% lower on Friday. Next support sits at $108.
• CMCSA – Price broke below the $54.50 support level and has since come back to retest it. This provides a good risk/reward bearish entry. 
• DIS – Currently at major support. Look for bullish price action at current levels for further confirmation of long entry.