2 FAANG Stocks That Could Soar in January

NFLX tends to rally to start the year, while FB is sending up bullish signals of its own

Dec 28, 2017 at 1:34 PM
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The shares of Netflix, Inc. (NASDAQ:NFLX) are muscling higher today, though the specific catalyst is unclear. Meanwhile, fellow FAANG stock Facebook Inc (NASDAQ:FB) is also in the black, after a rough start to the short holiday week. What's more, both NFLX and FB stocks could extend today's upside momentum to start 2018, if recent history is any guide.

Netflix the Best Stock to Own in January

NFLX has generated the best January returns of all S&P 500 Index (SPX) stocks that have traded for the past 10 years. Specifically, the equity has averaged a monthly gain of 23.66%, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, and ended the month higher 80% of the time. That's hands-down the best return, with the next highest coming in at under 16%.

At last check, Netflix stock has surged 3% to trade at $191.94, and is set for its highest close since suffering its worst day in a year back in late November. The shares are now knocking on the door of their 50-day moving average, which had acted as support until that dismal November day. Another 23.66% rally from current levels in January would place NFLX shares around $237.12 -- well into uncharted territory.

netflix stock chart

Should the FAANG stock once again shine in January, an exodus of bears could help. Fourteen analysts maintain "hold" or worse opinions, leaving the door open for potential upgrades to bring more attention to NFLX stock. Meanwhile, short interest represents nearly a week's worth of pent-up buying demand, at the equity's average daily trading volume -- plenty of fuel for a short-squeeze boost.

Further, NFLX sports a Schaeffer's put/call open interest ratio (SOIR) of 1.53, which is higher than 99% of all other readings from the past year. This indicates that near-term options traders have rarely been more put-heavy in the past year. An unwinding of pessimism in the options pits could also translate into a tailwind for Netflix shares.

Facebook Pullback Could Be a Buying Opportunity

Facebook stock has also struggled since that dismal day for FAANG back in late November, bumping up against the $180 region. Prior to that down day, FB shares were flirting with record highs, peaking at $184.25 on Nov. 28.

However, the stock recently came within one standard deviation of its 80-day moving average, after a lengthy stint above this trendline. After the last 11 pullbacks of this nature, FB stock was higher one month later a whopping 90% of the time, per data from White. In fact, the shares averaged a one-month gain of 4.63% after these technical signals. A similar rally in the next month would put Facebook stock around $186.78 -- in uncharted territory. At last check, the stock was 0.5% higher at $178.51.

facebook stock chart

Unlike fellow FAANG member NFLX, though, Facebook stock is already beloved on Wall Street. All 27 brokerage firms following the social media concern deem it worthy of a "buy" or better rating, and short interest accounts for less than 1% of the stock's total available float. As such, FB shares could struggle to convert fresh buyers, with most traders already on the bullish bandwagon.

 

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