Tech stocks continue to be hit hard. In recent weeks, it were the large cap tech stocks that were hit hardest. Amazon started crashing after releasing disappointing earnings and closed 12% lower. That’s very unusual for a stock with a market cap of +1T. After such a long period of suffering, the question comes up with tech stocks are getting attractive or whether this is just the beginning of a very long period of suffering? Are we able to forecast if the time has come for tech stocks?
Maybe, just maybe it is getting time to consider some stocks in specific tech segments.
But we’ll have to start with this warning: whatever is falling can fall lower. That’s because there is bearish momentum in the Nasdaq right now, and bearish momentum is dominant until there is a turning point.
We feature this one chart which is coming from our weekend alert to Momentum Investing members, it’s another market analysis full of insights. Last weekend, we shared 40 charts in our attempt to explain to our members what is going on in markets.
The lower pane is the warning sign: the 13 year Nasdaq chart which shows how the index came down this year. We can easily spot how a parabolic move came to an end after an 8-fold rise since 2010.
The first pane is a breadth chart (weekly timeframe): the % of stocks that is trading above its 200 day moving average (DMA) came down to 20%. In historic terms, this is very low. This happened in only 4 instance in the last 13 years, all of them proved to be great buy opportunities.
How to know whether this is a buy opportunity? How to avoid being trapped in case the Nasdaq started a multi-year decline? We try to address this in our weekend updates, with short / medium / long term timeframes, especially in our Momentum Investing service.