3 Reasons Why Nasdaq’s Breakout Will Continue

By Taki Tsaklanos
6 years Ago

The Nasdaq Composite is breaking out to new all-time highs. We believe Nasdaq’s breakout is likely to continue as indicated by the charts below.

3 months ago, in March to be precise, we shared how tech stocks’ performance is solid even after the notable dips in February: ” Nasdaq and tech Stocks: Charts show a Strong Performance likely to continue“. We believe this strong performance will possibly continue. In this article, we cover 3 reasons why we believe this strength is here to stay.

# 1: Nasdaq breakout: Findings from our inter-market analysis

Readers must vividly remember that our research team was intrigued and fascinated by the performance of what we consider the market’s leading indicators: US 20 Year Yield, Russell 2000, the Small Capitalization’s index, the Japanese Yen. They were all trading close to key levels that could possibly trigger a risk-on or a risk-off period for the stock markets.

After thorough research, we concluded that we are still within a strong risk-0n period and a rising interest rates environment. This makes it a perfect conjuncture for tech stocks to thrive and outperform.

#2: Nasdaq’s breakout is happening at the same time as the Russell 2000’s strong performance

Russell 2000 is currently breaking out and we’ve covered its performance in our article: The Real News That Matters: Leading Stock Indicator Breaking Out in 2018. This is another confirmation for the strength of the move in the Nasdaq composite as there is a strong correlation between the performance of Small caps (Russell 2000) and the Nasdaq composite. Both of them breaking out in the same direction is a strong confirmation for the risk-on attitude in the market.

#3: Long term charts show that the Nasdaq is breaking out

As shown below, the Nasdaq composite’s 5 years chart shows that after consolidating the gains from 2017 over a period of 6 months, Nasdaq is breaking out to new highs and this could be the beginning of a new leg up similar to the one that started towards the end of 2016.

However, investors need to watch the 7500 level very closely as if it falls below that level, we might see the consolidation continue for another couple months before another attempt to breakout again.

The second chart is the Nasdaq composite MSCI World Index, showing the inception of a breakout and if it holds, then Technology is the place to be, hence our positive outlook for Tech stocks and the select Top Blockchain stocks that we believe will benefit from the current conjuncture and the recovery in the Cryptocurrency market.