By Michael Moskie
MATANA is an acronym which is derived from the name of the following 6 technology stocks:
Microsoft
Apple
Tesla
Alphabet
Nvidia
Amazon
MATANA is considered by many to be the new replacement for FAANG. FAANG was an acronym coined by Jim Cramer of MSNBS’s Mad Money fame in 2013. The following stocks were represented by the acronym:
Amazon
Apple
Netflix
Introduction
In their never-ending search for ways to make money, many investors look to Jim Cramer on MSNBC for guidance. His show Mad Money has been popular for many years. Back in 2013 he coined the term FAANG to describe a group of high performing technology stocks that investors should consider.
This label caught on and went viral. Many investors used FAANG as a guide for their stock purchases. Since they were so strong many other writers in the financial media began using FAANG as a benchmark to measure the health of the market.
What is FAANG?
FAANG was the name given to an informal group of stocks by TV financial host Jim Cramer. This grouping was basically an attempt by Cramer to highlight several tech stocks that he felt were going to perform well in the long term.
What happened?
Basically Facebook (Meta) and Netflix have become serious underperformers. The addition of Microsoft, Nvidia and Tesla round out the remaining FAANG companies with solid performers in different parts of the tech sector.
What is MATANA?
The well-respected head of a company called Constellation Research; R “Ray” Wang has coined a new acronym that he believes more accurately represents the “gold standard” of the market. That acronym is MATANA. He recognized the flaws that were developing in the FAANG model. Wang basically took FAANG and removed Facebook and Netflix from the list and added Microsoft, Nvidia and Tesla
How to trade MATANA stocks
The next question is “what am I going to do with this information”. We believe that investors will use this to try to help their stock selection. The following is a list of 4 trading rules upon which to rely on while trading MATANA. As of this writing, we are currently in a bear market which makes these rules even more important to follow.
- Trading Rule #1: These are solid companies. Can be relied upon to act with “integrity to the market”.
- Trading Rule #2: Since they are tech stocks, they will trade along with the Nasdaq. To determine the strength and/or weakness of each stock you need to compare to the Nasdaq
- Trading Rule #3: Never short MATANA stocks. These are long plays only.
- Trading Rule #4: You must start building a position in these stocks very slowly and average them as low as you can. Don’t worry about small size, before you know it you will have a substantial position
Relative Strength vs. Nasdaq
When you look at trading rule #2 above, what we are talking about to is relative strength. For you to be an effective trader, you must start studying the relative strength of the stock you are trading versus the major average these stocks tend to trade “with”. In the case of MATANA it is the Nasdaq. The Nasdaq is the “tech” average due to its heavy weighting with technology stocks.
Start asking yourself questions like: When the Nasdaq is down 3% for the day, what is your MATANA stock doing? Is it up or down? If it is down, how much more or less is it down compared to the Nasdaq? By having an index to compare your stock to, you gain a perspective on how strong or weak your stock really is.
If you continue to do this religiously you will start to notice that you are making better trades because you have a real handle on where the stock is going.
Key Takeaways
- FAANG was an acronym coined by Jim Cramer on MSNBC’s Mad Money
- It was intended to identify key benchmark stocks moving the market
- With time FAANG was becoming obsolete
- MATANA is a new acronym coined by R. Ray Wang of Constellation Research Inc.
- It is the new FAANG
- FAANG with ex Facebook/Netflix removed and Microsoft, Nvidia and Tesla added
- To successfully trade MATANA you need to use the Nasdaq index as a benchmark
Conclusion
In their quest to win in the market, investors look everywhere for an edge. The media is often a place where they can get some of their needed data. Jim Cramer of MSNBC’s Mad Money has been one of those places for quite some time. When he coined the term FAANG it caught on and become viral because of the huge popularity of that show. The FAANG stocks proved to be a great guide for investors looking for growth.
Like everything else, over time the effectiveness of FAANG became diminished. The was due to the poor performance of several stocks like Facebook and Netflix. It was time for a new acronym.
R. Ray Wang stepped in and set the new standard by identifying a new acronym. Now it is time for us to take it, use it and let it help us have some winning trades and make money.