The stock market has been on a wild ride in recent months, with January showing strong bullish momentum followed by a shift in sentiment in February. While the overall market conditions have become less bullish than they were at the end of 2023, growth leadership names have continued to show strength.
The NYFANG+ index, which tracks leading growth stocks, is up about 12% year-to-date, outperforming the S&P 500 and Nasdaq 100, which have gained only 5%. This performance gap between mega-cap growth names and other stocks is quite significant, highlighting the resilience of the growth stocks in the current market environment.
Three key growth stocks to watch in this period are Meta Platforms, Amazon.com, and Netflix. These stocks have shown similar patterns over the last two years, experiencing breakouts and retracements at key resistance levels. After gapping higher on their first-quarter earnings releases, these stocks have struggled to break out of their recent trading ranges.
The period following a price gap is crucial in assessing investor sentiment. If a stock gaps higher and continues to trade higher, it indicates strong buying interest. However, if a stock trades lower after a gap, it suggests profit-taking and potential weakness in the stock.
The ability of these leading growth names to hold their recent price gaps could be a key indicator for the broader market. If these price gaps fail to hold, it could signal a more significant downturn in the growth-oriented benchmarks. With seasonal weakness typically observed in February and March in an election year, investors are closely watching these key growth stocks for clues about market direction.
In conclusion, while the market may be facing some headwinds, the performance of these leading growth stocks will be crucial in determining the market’s next move. Investors should pay close attention to how Meta Platforms, Amazon.com, and Netflix navigate the current trading environment to gauge the overall market sentiment.
