The Nasdaq Is Struggling at This LineLast week we cited the falling trendline in Apple. So far, it hasn’t broken out. Not surprisingly, this pattern appears in other key names like Facebook and Advanced Micro Devices. Most importantly, it’s also on the Nasdaq-100’s daily chart.
The tech-heavy index has been fighting this downward trend for most of November. This morning it made an attempt to rally above it but only stalled and made a lower high versus Tuesday.
Another key chart feature for NDX is the large bearish engulfing candle on November 9 – the same day Pfizer announced its coronavirus vaccine.
The stock market has undergone major shifts since then as investors embrace the reopening narrative. Energy, financials, industrials and small caps have soared. The old tech leaders have been neglected.
It’s also important to note that NDX initially led the bounce after the election. But then it got hammered by the vaccine news. That kind of failed rally attempt might be especially bearish because it produced a false breakout.
Finally don’t forget about bond yields, which may rise now that bond prices are near the top of their channel. Higher yields can reduce the appeal of high-multiple growth stocks.
Traders may want to keep their eye on NDX and consider its downside potential, especially if the broader market pulls back. Nasdaq and growth stocks may become a source of funds for investors looking to add cyclicals like financials.
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