The tech stocks came under massive pressure over the past few days which resulted in the extreme oversold of the Nasdaq index. Some of the stocks were down to more than 20% but chances are that bargain hunters will push them back up. Markets commenced the new year by consistently new unsurpassed heights through a large portion of the first month of 2021 before the increases dissipate.
During these few months of 2021, unpredictability and volatility were the main elements in the political as well as economic space of the world such as Joe Biden presidency, attack on the Capitol, and senate run off decisions. However, extreme speculations were observed in certain corners of the stock market.
Michael Winter, the founder of Leatherback Asset Management talked about these extremes speculations and stated that, “I suspect when the time comes, we’ll look back at this period and see how obviously silly some valuations got, but right now, we’re in the punch bowl phase and markets seem bulletproof, while traders feel ebullient and happy.”
According to Nasdaq’s own website the emphasis of the marketplace will be again shifted towards the archetypal interests like business earnings, the pandemic, Joe Biden’s policies and the pace of economic revival after the pandemic.
Nasdaq has moved higher in the last few days, does it have the possibility to keep surging higher and higher? In this article we will have a look on the technical aspects and daily time frames that might be behind the rise of Nasdaq.
Time Frame Analysis of first few days of March:
The price moved below the 50 day simple moving average then it crossed below the 100 day simple moving average, it did not stop there and continued to move towards 200 day simple moving average. Near the 200 day simple moving average, it was seen that the prices were oversold which resulted in a bounce in the Nasdaq prices. However at the same time it started to descend towards negative divergence. The prices when came near the 50 day simple moving average continued towards the upward trend. When it came near the 100 day simple moving average it started moving towards the upside again. The first level of resistance it faces is the 50 day simple moving average. Here we get to know that if the prices can stay above the 50 day simple moving average after touching the hundred decimal moving averages makes it confirm that the prices will move to the upside and a new trend will take place but if the prices fail, the trend will move towards the downside. On the time frame the price of Nasdaq broke at 200 day simple moving average and continued towards 100 day simple moving average. Now wven if it breaks close to 100 day simple moving average, it will continue to go towards the all-time high.
Recovery from the pandemic:
Covid played one crucial role in the stock market over the year 2020 and it will be important to see the recovery of stock market during this year. According to Bill Merz, the head of fixed income research, “The most important thing for our well-being and the economy and capital markets is progress around Covid, both in terms of infections and vaccinations. There is a lot of hope and expectation that the vaccine rollout continues at a rapid pace and vaccine efficacy is what we expect it to be and that, as a result, economic activity will continue to gradually normalize.” He further adds that “Investors are positioning for an economic recovery and so we need to see a continuation of progress in order to maintain that strong sentiment.”
Outlook for 2021:
It decidedly hasn’t been an uninteresting start of this year for monetary patrons, yet the hypothetical force of January has been very contained to explicit stocks. Until further notice, yet here is no such inspiration to acknowledge that the point of view for the more broad market in 2021 will change appropriately.
First thing in January, as the amount of Corona virus cases increased, monetary sponsor dismissed the pandemic to focus in on what may happen quite a while in a manner of speaking. Markets were looking forward to a reality where the vaccine was accessible, which permits movement to resume nearing typical once more, according to Merz. The immunization is furthermore top of cerebrum for the Federal Reserve. Following the Fed’s most recent get-together in January, Chair Jay Powell said the economy is coordinating and swore that the public bank will leave financing costs just about nothing and continue with its quantitative encouraging project for quite a long time to come.
“That is really the main thing about the economy is getting the pandemic under control, getting everyone vaccinated, getting people wearing masks and all that. That’s the single most important economic growth policy that we can have,” according to Powell.
All things considered, Fed approaches have assumed a vital part in business sectors. By keeping security yields low, cash continues to stream into stocks instead of securities in view of the greater relative returns. The projected upgrade bundle would infuse additional cash into the economy, which could additionally support supply costs. “We anticipate a solid year for stocks. We do have a glass-half-full outlook, we have a slight preference for holding larger-than-usual positions in stocks and slightly less than normal positions in bonds to capture the potential for additional upside,” he further added.
There’s been a more extensive move in progress inside the financial exchange. Financial backers have begun wagering on those stocks that should profit most from the economy resuming, similar to cafés or travel-related organizations, and they’re dumping a portion of the pandemic top picks, similar to tech stocks. While the S&P 500 finished February up 2.6%, the tech-weighty Nasdaq 100 fell 2.4%—and previous market dears like Tesla (TSLA) tumbled over 15%.
Disclaimer: This content does not necessarily represent the views of IWB.