After peaking in mid-July, the Roundhill Magnificent Seven ETF (MAGS) corrected nearly 20% over the course of 20 trading days. Post the August low, the group rallied over the course of the following 64 trading days to return to all-time highs in early November. MAGS broke out above $50 on November 6. The chart subsequently consolidated in a bullish pennant chart pattern, trading as high as $52.58 and as low as $50.14. The chart then proceeded to make lower highs and higher lows, coiling until the decisive resolution higher, breaking out to close at $52.68 on December 2. In our view, the Magnificent Seven are on offense.
Source: Bloomberg; Data as of December 5, 2024. "Normalized" refers to adjusting data to a common scale or baseline, which allows for easier comparison between different datasets, even if they have different units, magnitudes, or starting points. The performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than their original cost. Returns less than one year are not annualized. For the most recent month-end performance, please call (855) 561-5728. For more information, including current holdings and standardized performance: https://www.roundhillinvestments.com/etf/mags/
Which names are driving the group higher? Let’s break down the price action for each of the Magnificent Seven names.
AAPL has broken out to new all-time highs. After consolidating since July, it closed above resistance on the first trading day of December, setting a strong tone for the month ahead. AAPL has been surrendering relative leadership versus the S&P 500 since the July peak, but is now seeing relative performance improve. AAPL’s breakout above prior summer highs is a positive sign for the Magnificent Seven.
Source: Bloomberg; Data as of December 5, 2024. Past performance does not guarantee future results.
As the flagbearer of the AI revolution, NVDA has been in a decisive uptrend since its 50-day moving average crossed above its 200-day moving average in January 2023. Up to the June 20, 2024 intraday high, NVDA tallied a +183% year-to-date return. Subsequently, NVDA now trades just +3% above June’s intraday high. After consolidating for almost 6 months, the stock is now less than 10% from record prices. With relative performance also improving, we believe NVDA appears to be in a position of strength.
Source: Bloomberg; Data as of December 5, 2024. Past performance does not guarantee future results.
Based on our analysis, the technical set-up for META appears bullish. After consolidating and testing September’s breakout, META recently broke above prior resistance levels in the 600 to 605 zone. The risk / reward appears defined, with support at the rising 50-day moving average not far behind current price levels. In addition, META has outperformed the S&P 500 by over 5% since November 22, 2024. The relative performance breakout has not occurred yet, but in our view, recent price action is encouraging.
MSFT has been a relative laggard within the Magnificent Seven since mid-July. From a relative performance standpoint, MSFT has not contributed to Magnificent Seven’s leadership status and has moved sideways, as evidenced by the flat 50-day and 200-day moving averages. However, the tides could be turning. MSFT’s price is starting to perk up and is trading at roughly 2 and half month highs. Hardly a definitive bullish signal, but nascent signs of price reacceleration are encouraging and are being supported by a small turn in its relative performance versus the S&P 500. MSFT coming to life could be crucial for the next potentially durable push higher in the Magnificent Seven.
GOOGL has yet to recover convincingly from its July peak in price. After breaking below the 200-day moving average in September, the stock quickly responded and has since used the 200-day as rising support. While the relative performance picture has been sloppy, the pick-up in absolute performance has our attention. Hardly a standout leader, it is a positive that GOOGL has not made a relative low since early September. GOOGL has not helped the Magnificent Seven lately, but it hasn't hurt the group much either.
AMZN is breaking out and trading at new all-time highs. Additionally, its relative ratio versus the S&P 500 has returned to early July levels, reflecting an improvement in AMZN’s leadership compared to the broader market. AMZN has support at its rising 50-day moving average, as well as the $200 price level. Overall, AMZN’s swift ability to recover from summer’s correction has been a positive for the Magnificent Seven.
Source: Bloomberg; Data as of December 5, 2024. Past performance does not guarantee future results.
While TSLA’s 2024 has shown extraordinary price action, zooming out a few years demonstrates the significance of its recent breakout. TSLA has been trading in a base for roughly 3 years and recently surpassed prior highs from the second half of 2022. As the stock has improved on an absolute basis, its relative performance has similarly turned higher, breaking a downtrend that’s persisted since mid-2022. The stock is approaching resistance in the $400-$415 zone, but we believe any weakness is natural and could be a buying opportunity. TSLA deserves credit for the Magnificent Seven’s clear resiliency over recent months.
The Roundhill Magnificent Seven ETF (MAGS) is exhibiting impressive upside momentum in a supportive technical position. We believe the Magnificent Seven have the potential to trend higher given the bullish tailwinds from the underlying constituents.
MAGS seeks to provide investors with focused exposure to the Magnificent Seven stocks, the leaders shaping the future and driving innovation in the tech sector. Just as there will be moments of pronounced outperformance, there will likely be periods of market volatility in which certain companies within the Magnificent Seven will struggle to perform. This is why MAGS seeks to provide equal weight exposure to these seven innovators rebalanced quarterly. The exposures to each respective holding will fluctuate as the holdings rise, fall, or trade sideways. At the next rebalance date, the holdings will then be adjusted to equal portfolio weights. We believe this crucial feature, along with pure exposure to the Magnificent Seven, makes MAGS a viable option over market capitalization weighted, diluted alternatives focused on the top companies in well-known indexes.
Investors should consider the investment objectives, risk, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about Roundhill ETFs please call 1-855-561-5728 or visit the website at www.roundhillinvestments.com/etf/MAGS. Read the prospectus or summary prospectus carefully before investing.
Investing involves risk, including possible loss of principal. The Fund expects to have concentrated (i.e., invest more than 25% of its net assets) investment exposure in one or more of the Technology Industries at any given time, which may vary over time. Further, the Fund expects to obtain such investment exposure by transacting primarily with a limited number of financial intermediaries conducting business in the same industry or group of related industries. As a result, the Fund is more vulnerable to adverse market, economic, regulatory, political or other developments affecting those industries or groups of related industries than a fund that invests its assets in a more diversified manner. The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.
Roundhill Financial Inc. serves as the investment advisor. The Funds are distributed by Foreside Fund Services, LLC which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.
Glossary:
S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
Breakout: A breakout is when the price of an asset moves above a resistance area, or moves below a support area. Breakouts indicate the potential for the price to start trending in the breakout direction. For example, a breakout to the upside from a chart pattern could indicate the price will start trending higher.
Breakdown: A breakdown is a downward move in a security's price, usually through an identified level of support, that portends further declines. A breakdown commonly occurs on heavy volume and the subsequent move lower tends to be quick in duration and severe in magnitude.
Resistance: Resistance is one of the foundational elements of technical analysis (along with its corollary: support). Resistance is a price or price zone above the current market that contains the upside movement of an asset. Resistance is where selling interest appears over time, blocking further upside progress.
Support: A support level is the price level that an asset doesn't fall below for a period of time. An asset's support level is created by buyers entering the market whenever the asset dips to a lower price.
50-Day Moving Average: A simple moving average is constructed by taking a mean average of a time series (50-day) over a given period of time. Moving average often provides a better indicator of trends.
200-Day Moving Average: A simple moving average is constructed by taking a mean average of a time series (200-day) over a given period of time. Moving average often provides a better indicator of trends.
Relative Performance (Return): Relative performance is the return an asset achieves over a period of time compared to a benchmark. The relative return is the difference between the asset’s return and the return of the benchmark.
Uptrend: An uptrend describes the price movement of a financial asset when the overall direction is upward. In an uptrend, each successive peak and trough is higher than the ones found earlier in the trend. The uptrend is therefore composed of higher swing lows and higher swing highs. As long as the price is making these higher swing lows and higher swing highs, the uptrend is considered intact.
Downtrend: A downtrend is a gradual reduction in the price or value of a stock or commodity, or the activity of a financial market. A downtrend can be contrasted with an uptrend.
Pennant: In technical analysis, a pennant is a type of continuation pattern. It's formed when there is a large movement in a security, known as the flagpole. Then, the flagpole is followed by a consolidation period with converging trend lines—the pennant—followed by a breakout movement in the same direction as the initial large movement, which represents the second half of the flagpole.