Many prudent investors are asking: “Who is buying popular tech stocks at such high prices?”
The answer to the question will provide you with an edge in the stock market. Let’s explore that.
Gain an edge
Please click here for a chart of money flows in FAANG stocks. Money flows, when properly segmented, provide an edge. The FAANG stocks are Facebook FB, -1.03% Apple AAPL, +0.71% Amazon AMZN, -1.16% Netflix NFLX, -0.69% and Alphabet GOOG, -1.30% GOOGL, -1.40% The table also provides money flows for popular stocks AMD AMD, +2.21% Microsoft MSFT, +0.30% Nvidia NVDA, +0.80% Tesla TSLA, -0.77% and Alibaba BABA, -1.54% Please see “This is the one stock to buy if the stock market crashes.”
A valuable technique for investors is to look at money flows instead of only volume. This is a good way to gain an edge in the markets. At The Arora Report, we focus on three kinds of money flows that have proven to provide the most predictive power. The three important money flows are the following:
• smart money (pro investors)
• momo (momentum)
• short squeeze
The table breaks down the money flows by the foregoing categories. The table also ranks FAANG stocks based on the ZYX Change Method.
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The answer from the analysis of the data in the table linked above is that, at this time, popular tech stocks are being driven by the momo crowd; the “smart money” is not buying them as a group.
If history holds true, the smart money is likely to buy these stocks if one of the three following scenarios develops:
• These stocks suffer a correction.
• These stocks break out from current trading ranges.
• More progress is made on tax reform, and the market reacts favorably to the details. Please see “Trump’s tax plan sets the stage for Dow 30,000.”
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. All recommended positions are reviewed daily at The Arora Report.
Nigam Arora is an investor, engineer and nuclear physicist by background, has founded two Inc. 500 fastest-growing companies, is the developer of the adaptive ZYX Global Multi Asset Allocation Model and the ZYX Change Method to profit from change in trading and investing. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.