NASDAQ 100: Will the bubble burst again?

Intermediate
Nasdaq historical analysis

With tech companies doing even better thanks to the lockdown, as more people were forced to stay at home and rely on online purchases and services. NASDAQ keeps pushing higher despite other indices struggling to reach their highs again.

Now let us looks at the technical analysis. 200SMA on a weekly chart is always a good indicator of a major trend, recent sell off in March, touched it and bounced. We can see that it was also a 3rd touch on the trend line here, so now it is confirmed. Another interesting line I would like you to see is the one connecting the highs from January 2018, we now have 4 touches here. This week we are testing it again. This seems like a big expanding pattern now. Overall bulls do not seem exhausted and massive FOMO keeps people in tech sector.

Let us apply Elliott Waves now. Overall, this is a big uptrend and we can clearly see a bullish 5 wave formation, which means all this is part of a bigger cycle wave 1. Now that wave 1 in a grand cycle is complete, we are due for corrective ABC pattern, or wave 2. The selloff in March was a clear wave A based on the sharpness of the move. Now we are seeing a bounce and new all-time highs. Now since we already see this as an expanded price movement, in Elliott Waves this could be an expanded flat, where wave B goes above the start of wave A. Usually it can go up to 123.6% of wave A. In this case it could go to around 10880 level. From there we could see the start of wave C, or earlier of course. But the chart points that we are still due to sell off again. Targeting wave C means applying Fibonacci extensions to waves A and B, potential to go from 127.2 to 161.8 extension. Another possibility of this formation is that it is a running flat, and if so, then wave C can not go lower than wave A. Problem with running flats is that they are extraordinarily rare.

Fundamentals show only good things for tech sector, so is the selloff happens, then the trigger will be outside of it. US elections this year could make so volatile moves in the market as D Trump tries to stay in office.

Editor

Anton is an accomplished Director at Markom Development Ltd where he combines cross functional competencies in staff management, operations planning, customer retention and strategy development. BU... Continued

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