Chart Of The Day: All Eyes On NASDAQ
Fawad Razaqzada | Dec 17, 2021 22:31
This article was written exclusively for Investing.com
The focus will remain on technology shares today after the NASDAQ surrendered all of the gains made in the aftermath of the FOMC policy decision on Wednesday. Investors are concerned that policy tightening from the Fed and other central banks will boost the appeal of value stocks and weigh on the appetite for lower-yielding growth stocks, especially those with overstretched valuations.
Sentiment hasn’t been helped in the sector by insider selling, with the likes of Elon Musk dumping some of his Tesla (NASDAQ:TSLA) stock recently.
In fact, the NASDAQ hasn’t been going anywhere in the last month and a half. The tech-heavy index has been trading side-ways with big swings in either direction. The big swings are possibly a sign of investor nervousness. After rising so much over the past couple of years, and in light of tightening from the Fed, a bit of a correction wouldn’t come as a major surprise.
It is possible therefore, that we may have seen at least a short-term top, especially in light of Thursday’s reversal-looking price action, as you can see on the chart:
The index is now testing key support around 15,700, an area where the index found resistance previously at the end of August and start of September. A daily closing break below here could pave the way for a bigger drop. If that happens, we may see the bears drive the index down towards the rising trend line that has been in place since last November or even the 200-day moving average, which hasn’t been tested since breaking back above it just after the height of the pandemic in April 2020. So, a correction is overdue anyway.
While the short-term technical outlook appears somewhat bearish, it is important to note that the NASDAQ is still in an uptrend, so its recent struggles should be taken with a pinch of salt. It is possible that the long-term trend will remain intact for a while yet, even if we see a correction.
So, I am not calling the top here, in case you were wondering. Just highlighting the potential for a correction.
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