FANG Stocks – Should You Sink Your Teeth into the FDN ETF?

Dow Jones Internet Index Fund

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by Mark Soberman in Exchange Traded Funds, Industry ETFs
December 8, 2017 0 comments

First Trust Dow Jones Internet ETF (FDN)

Key Statistics (close 12/7/17)

Daily High 108.77 Short-Term Trend Bullish

Daily Low 107.39 Intermediate-Term Trend Bullish

Daily Close 108.62 Long-Term Trend Bullish

Minor Support Level 104.30 Minor Resistance Level 109.79

Major Support Level 27.62 Major Resistance Level 118.81

Minor Buy Signal 111.41 Minor Sell Signal 103.24

Major Buy Signal 126.45 Major Sell Signal 22.72


During the past few years, the financial press has inundated investors with stories and reports about the high flying FANG stocks. These stocks have become the darlings of Wall Street. Money managers and hedge funds across the country have a huge position in the FANG stocks for fear of missing out on the next big move.

What are the FANG stocks and why are they so popular? FANG is an acronym originally coined by CNBC analyst Jim Cramer in 2012. FANG represents Facebook, Amazon, Netflix and Google (which officially changed its name to Alphabet in October 2015). In a nutshell, these companies represent the leaders in technology and internet services. They are on the cutting edge of the latest trends in technological devices, social media and e-commerce tools.

During the past decade, FANGs have dramatically outperformed the stocks in their respective peer groups. These stocks can do no wrong. Analysts on Wall Street continue to raise their price forecasts and earnings projections for these four companies. How long can the party continue? Can the FANG stocks maintain their torrid rate of growth? In order to answer these questions, let’s review the performance of the FANG stocks along with the overall performance of the internet sector.

First Trust Portfolios L.P. launched the Dow Jones Internet Index Fund on June 19, 2006, using the ticker symbol FDN. The ETF is comprised of 42 separate holdings. All companies in FDN are internet related within different sectors of the economy. The top two sectors are information technology and consumer discretionary. In fact, these two sectors represent 89% of the ETF. In terms of individual holdings, the FANG stocks are among the top five companies in FDN. The FANG stocks account for 31.6% of the entire ETF. As you can see, FDN is basically a FANG ETF with a few internet related stocks thrown into the mix. Of course, the FANG stocks can be found in several ETFs. However, FDN has the largest exposure to FANGs of any ETF.

Therefore, FDN is a great investment vehicle for monitoring the performance of the FANG stocks.


FDN has enjoyed a substantial rally during the past year. In fact, the ETF has been moving higher since the very first trading day of 2017. Based on its opening price of 80.52 on January 3rd, FDN has increased 34.9%.

Obviously, the bulls are in complete control of FDN. The next short-term resistance level is 109.79. A weekly close above 109.79 opens the door to 111.41. In order to reverse the bullish trend, the bears need a weekly close below 104.30.

Based on the Aroon Oscillator, FDN has a slightly overbought reading of +44. The Aroon Oscillator is programmed differently than most stochastic indicators. The oscillator fluctuates between -100 and +100. A reading of 0 would indicate a neutral position. Therefore, a reading of +44 with FDN is moderately overbought. However, the ETF could easily generate another sharp leg to the upside before it becomes extremely overbought.


The FANG stocks have generated an incredible rate of return during the past decade. Taken as a group, the overall return since December 2007 is 1,750%. In other words, FANGs have generated an average annual return of 175% for the past ten years. Absolutely amazing! By far, the biggest winner has been Netflix, which has increased 5,302% since December 2007.

As a side note, Facebook has only been trading publicly since May 2012. The stock has increased 318% since its IPO.

Going forward, can these high flying tech and internet giants continue to generate such dramatic returns? History would suggest that these stocks are way overdue for a cooling off period. Typically, stocks that produce such outsized investment returns (like FANGs) will eventually hit a brick wall and begin to yield mediocre returns for the next several years.

Will the law of averages eventually catch up to the FANG stocks? Most likely, the answer is, “Yes.” However, the difficult part is the timing. Exactly when will FANGs begin to underperform the stock market averages? Of course, nobody knows the answer with 100% certainty. All we can do is form an educated guess.

A strong argument could be made that the global economy is in the early phase of a new technological revolution in terms of artificial intelligence, machine learning, robotics, cloud storage devices and an array of e-commerce tools. To use a sports expression, the FANG stocks could only be the 3rd inning of a 9 inning baseball game. If this is true, FANGs could easily continue to outperform the stock market averages for several more years.

Despite the fact that the FANG stocks have been in business for well over a decade, they are still considered to be growth stocks by most Wall Street analysts. Therefore, FANGs are probably in the “sweet spot” of their product life cycle. If so, these stocks have the ability to achieve substantial earnings growth for the next several years.

Thanks to the performance of the FANG stocks, FDN has been pushing its way higher since the overall stock market formed a major bottom in 2009. The long-term momentum is definitely in favor of the bulls. The next long-term resistance level is 118.81. In order for the long-term trend to turn bearish, FDN must obtain a weekly close below 27.62. Of course, this type of decline would require some type of major fundamental disruption in the global financial markets.


Please review the attached 1-year chart of FDN. The ETF has been rising steadily throughout the entire year of 2017. The next short-term resistance level is the Nov 27th high @ 111.41. The bears need a weekly close below 104.30 in order to push the momentum in their favor.



Please review the attached 10-year chart of FDN. A new secular bull market began in November 2008. FDN has been in a roaring bull market for the past nine years. Please notice the “flash crash” that occurred on August 24, 2015. This is a perfect example of the volatile nature of financial markets. The secular bull trend will remain firmly in place as long as FDN stays above 27.62 on a weekly closing basis.

FDN Long Term Chart

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