Bears Battle Retail Traders as Tech Earnings Arrive

Nasdaq 100 Price Outlook:

Nasdaq 100 Forecast: Bears Battle Retail Traders as Tech Earnings Arrive

The Nasdaq 100 fell to its lowest level since January 19 after a Federal Open Market Committee meeting seemingly undermined market sentiment that was already fragile. Earnings from Apple, Facebook and Tesla were heralded as potential revivers of sentiment, but their performances in the immediate aftermath of their reports could suggest sentiment has already been dealt a fatal blow in the near-term.

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Apple Earnings

The largest component of the S&P 500 and Nasdaq 100, Apple, surpassed the considerable expectations investors maintain for the tech giant, beating on both top and bottom lines. Likely due to the sour attitude prevalent in the broader market prior to the Wednesday close, AAPL shares fell modestly following the release of the quarterly report. Still, the company’s stock trades tantalizingly close to its all-time high and the report offers an encouraging checkup for shareholders.

Facebook Earnings

The social media platform also offered a beat across the board, enjoying strong revenue, earnings per share and daily active users. Shares still declined, however, as the company suspects significant ad-targeting headwinds in 2021. At the time of writing, FB shares had fallen -7% before paring losses to trade nearly flat in the after-hours session.

Tesla Earnings

Tesla posted a divided quarterly report, boasting revenues above estimates but falling short on earnings per share. Like Facebook and Apple, TSLA shares pulled back in the wake of the announcement. Given the unprecedented rise in Tesla’s stock price, it could be argued the company had to meet the highest expectations. Thus, losses following a divided report with an underwhelming update on its roadmap for the future are well within reason in my opinion.

Mania on the Mind

While the FOMC rate decision and big-ticket earnings are key drivers of broader market performance and sentiment, much of the finance world remains enamored with single-stock names like GameStop (GME), AMC (AMC), AMC Networks (AMCX), BlackBerry (BB), Bed Bath and Beyond (BBBY), and other stocks with high short interest.

The rapid ascent of these names remains an intriguing story of the market that will undoubtedly appear in finance history books of the future. Regardless, the battle between retail traders and hedge funds might continue in the days ahead even as indices endure their largest single-day loss since October.

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That being said, even the hoards of Reddit-based retail traders will have a difficult time fighting declines in the broader indices so price action may turn increasingly volatile as the VIX jumps above 37 with one of its largest single-day gains ever.

Nasdaq 100 Technical Outlook

Weakness has seen the Nasdaq 100 seek support from a series of rising trendlines. Initial support resides along the trendline from early November, currently around 13,030, but its proximity to price could see it easily broken. Subsequent support might be derived from the psychological 13,000 mark followed by the Fibonacci level around 12,950 which has influenced price throughout January. Since all three of these levels were pierced in Wednesday trading, they might see their influence reduced.

Nasdaq 100 Price Chart: 4 – Hour Time Frame (October 2020 – January 2021)

nasdaq 100 price chart

Should declines continue in earnest, prior swing-highs may serve as areas of buoyancy, while a line in the sand may exist around 12,400 to 12,460 which coincides with the November peak. A breach beneath this level could open the door to steeper losses and a deeper pullback for the Nasdaq 100 index. Either way, the recent uptick in volatility could see price swing wildly between the different technical levels in the coming sessions. Follow @PeterHanksFX on Twitter for updates and analysis.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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