Hi friends,

Today we are over the technical analysis of the Magnificent 7 companies.

The primary tool we use is the Elliot Waves Theory, backed up by an analysis of the companies’ historical valuation multiples versus their growth rates. This offers us a holistic view of where the stock is at.

What’s unique about YX Insights is that we blend the fundamental analysis with the technical, thereby finding the sweet spot in between.

As usual, you can jump right into the individual stock section through the links below

• NVDA

• MSFT

• AAPL

• GOOGL

• AMZN

• META

• TSLA

Let’s have some fun!

Tools I find useful:

TradingView: I use TradingView for all my chart analysis. It is very fast and simple to play with, including the mobile and desktop apps. Sign up here to get $15 off your new TradingView plan.

Koyfin: I use Koyfin for stock screening, comparative analysis, and fundamental analysis. It provides very comprehensive data and features at a reasonable price. Sign up here to get 15% discount off all Koyfin plans.

Fastgraphs: I find Fastgraphs very useful in gauging whether a stock is underpriced or overpriced versus the fundamentals. Sign up here to get 25% off using the coupon “AFFILIATE25” at the check out.

NVIDIA (NVDA)

NVDA Weekly Chart

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What a spectacular run from $10 to $140 (after the open yesterday) in just 20 months.

My count is that we have 5 waves complete, with the 5th wave now looking satisfactory in terms of levels. This indicates a large pull back is due soon.

Zooming in on the NVDA hourly chart

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I count the sub-wave circle-v of 5 can also be regarded as complete, as typically wave 5 is 1.0 extension of wave 1. NVDA exceeded that target at the market open yesterday, but the attempt above $140 was violently rejected.

The sizeable drop could indicate that a top is in place. If today we open at 127, as shown by pre-market, we have a small 5-waves down to confirm the beginning of a down trend.

As always, these are probabilistic interpretations and should not be held as absolute views. Even the best chart setups can quickly deteriorate into the smaller-probability alternatives. The current state of play is that even if NVDA makes a second attempt at 140, I am happy to watch from the sidelines.

Once the top is in, I think NVDA is retracing below $100.

The three charts above (using Koyfin) show how EV/ Revenue, EV/ EBITDA, and P/E multiples stack up against the growth rates on a TTM (Trailing Twelve Months) basis.

You can see that there is a lag in which the valuations multiples move first, followed by the explosive actual growth rates. This implies that the market is roughly forward looking by 9-months. The peak EV/ EBITDA and P/E multiples versus the peak realised growth is about 1x : 4%.

Therefore, the forward growth estimates are key to supporting NVDA’s stock prices. If (and when) NVDA’s earnings growth is getting revised down, we will see further multiples contraction.

Microsoft (MSFT)

MSFT Weekly Chart

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Doubling the stock price of a world’s top 2 company in 18 months is no mean feat.

MSFT looks to be in wave iii of 5 right now. This means it likely has another leg to go.

MSFT Hourly Chart

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The standard expectation for wave iii here is the 1.382-1.618 extension of wave i placed at wave ii low. It puts us in the $470s range.

Because wave ii was steep, wave iv might be shallow, ahead of a final run up just under $500.

MSFT’s price versus fundamentals appears more efficient than NVDA. I observe only 1 or 2 months of lag between the peak valuation multiple versus peak growth (and vice versa), i.e. straight away after the earnings report. This is likely because MSFT has been well covered for a long time and difficult for investors to find an edge here.

Note that the Revenue and P/E multiples look expensive versus the growth rates compared with MSFT’s historical performance (looking at pre-2022).

Apple (AAPL)

AAPL Weekly Chart

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AAPL looks to be in the wave v of 5 from the January 2019 start. There is also a good chance AAPL has completed all of wave v of 5, with the next wave being a wave A correction down. More below.

AAPL Hourly Chart

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The hourly chart suggests the price action can satisfy wave v at the 2.0 extension of wave i.

To confirm a top is in place, we need to see 5 waves down from here. There is certainly a small chance that AAPL can try $232 (the 2.382 extension), but I don’t see good risk-reward at this point.

In terms of the valuation multiples versus growth, AAPL certainly looks very expensive across Revenue and Earnings.

Historically, there does seem to be a lag between the peaks of the valuation multiples versus growth. It seems like that the market right now is projecting a reaccelerating in AAPL’s growth in 2025. I think it really hinges on how the latest Apple Intelligence can translate to more sales in iPhones and iPads. They are also rumoured to be working on a cheaper version of the Vision Pro, but it could take some time.

Alphabet (GOOGL)

GOOGL Weekly Chart

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GOOGL also looks like it’s in wave v of 5. It had a very strong wave 3 run out in 2023, reaching the 2.382 extension of wave 1. This bullish momentum has also pushed the wave 5 target to a lofty 180, explained more on the micro chart below.

GOOGL Hourly Chart

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The sub waves of wave 5 are also riding on high momentum, with little retracement for waves ii and iv. We saw two bull gaps created in wave iii.

Now for wave v of 5, I think GOOGL can push for a one-more-high towards $180, i.e. the 3 extension of wave i.

Again, the risk reward is not great for the upside, but I would caution shorting it here until we see a top being confirmed by 5 waves down.

GOOGL’s valuation look expensive in terms of EV/ Revenue versus Revenue growth. However, the EV/EBITDA and PE multiples seem in line.

The valuation multiples seem to lead the realised growth rate by about 3-4 months.

AMZN

AMZN Weekly Chart

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I am slightly divided on how to count the waves from end of 2022. While I can make a case for 5 waves (meaning we are in a larger uptrend), wave 5 looks very extended (fib levels on the left hand side). Again wave 5 can be much more extended than wave 3 in a very bullish market, as long as wave 3 is not the shortest wave.

I can also count the chart as 3 waves (A-B-C, fib levels on the right hand side), which suggests the current rally from the 2022 year-end is more of a bear rally in the larger context.

Either way, the target for both wave 5 or C is in the $230s, implying a 20%+ upside from here.

AMZN Hourly Chart

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AMZN appears to be still progressing through wave iii. We could see the wave iii target of $210 being filled in July

In terms of valuation multiples, AMZN’s earnings multiples have been muted given the recent growth. Will we see an uptick after the next Earnings?

Meta (META)

META Weekly Chart

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META should be in wave 5 from the 2022 year-end low. The wave 5 target, $650 is also right at the upper end of the price channel since the IPO. This implies a potential 30% upside from the current level of $500.

META Hourly Chart

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Zooming into wave 5, I think the next pullback with the broader market could set up a nice entry around $460 to take advantage of waves iii and v of 5.

In terms of valuation multiples, META’s valuation is very responsive to its growth rate, showing strong consistency between the two.

Tesla (TSLA)

TSLA Weekly Chart

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Among the Magnificent 7 stocks, TSLA has the worst fundamentals - by far (see the Part 1 of our series exploring its Fundamentals). The poor fundamentals do explain the divergence between its stock price with the others of the group.

However, zooming out, from a technical perspective, TSLA seems to be in the early stages of wave 5, the target of which is above $600.

I will Zoom in on wave 5 before spelling out my caution.

TSLA Daily Chart

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If TSLA has put in a wave ii bottom at $139, then the wave iii target is $450.

Now, my word of caution is this: while technical analysis is generally good at probabilistic price levels, it tends to be poor about timing. This is why we combine the technical and fundamental methods to get a more rounded view of the state of play.

Right now, TSLA’s growth rate is suffering miserably, heavily pressuring on the valuation multiples. Can TSLA simply take off without its revenue or earnings (or margins) growth rate picking up? I don’t think so. That would be speculating solely on the valuation multiple expansion, which doesn’t look sustainable for a rocket ship to $600.

I think of the fundamentals as a source of fuel. TSLA needs a recharge.

Maybe the Tesla Master Plan 4 will do it.

A quick word from the author

I really appreciate your support for this newsletter.

Please feel free to share any suggestions or comments, either directly through email or in the comment section.

— Yimin

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.

References

1. All price charts are by Trading View

2. Valuation multiples vs growth charts are by Koyfin