Technical view Nasdaq stumbles hinting at a potential nearterm top

Long-time bulls should certainly have their guards up after today’s price action...

Downtrend 2

For over a year now, the big technology stocks that make up the Nasdaq 100 have been essentially a one-way trade to the upside, and any traders betting against that trend have been run over. Despite that backdrop, today’s price action is certainly ringing some alarm bells, at least in the short term, for Nasdaq 100 bulls.

Midway through last month, things were looking up: The Nasdaq 100 had just broken out to a fresh record high above $337 after finding support near its 100-day EMA in late March, and earnings expectations were high for the big tech behemoths that drive the index. Though we ultimately saw the four biggest holdings in the index (Appl, Microsoft, Amazon, and Alphabet/Google, together accounting for more than 33% of its value) crush analysts’ earnings estimates, those stocks generally saw only a lackluster reaction to the bullish fundamental news.

From a technical perspective, the Nasdaq 100 spent the last two weeks consolidating right at the previous highs as traders fought over whether the long-term uptrend could extend further. Today’s big bearish move has provided at least a short-term answer: No.

April’s “fakeout breakout” was also accompanied by a bearish divergence in the 14-day RSI indicator, showing declining buying pressure despite the modest new high in the underlying index price. This development suggests that the index may be ripe for a deeper retracement before fresh buyers can be found. Looking at the chart below, the Nasdaq 100 has already fallen below its 50-day EMA, opening the door for a continuation down toward previous-resistance-turned-support near $324.25 or the 100-day EMA near $320 next.

Chart analysis of NASDAQ 100. Published in May 2021 by

Source: TradingView, StoneX

A sustained break below that rising support line, if seen, would mark a change in the character of the established uptrend and could have longer-term bearish ramifications for the widely-followed index. Either way, long-time bulls should certainly have their guards up after today’s price action unless and until the Nasdaq 100 is able to definitively clear overhead resistance near $340.

Learn more about index trading opportunities.

More from Nasdaq

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account