As a technical trader, I am always looking for incongruities on the market to identify trades.
Well, the Nasdaq 100 Index has been struggling to get itself into positive territory today.
After outperforming the rest of the market on strong earnings from Microsoft Corp (MSFT), Alphabet Inc (GOOGL), and Meta Platforms Inc (META), QQQ shares were setting up for a break higher toward their summer 2022 highs.
But there are three stocks in particular that are really weighing down this tech-heavy index – and I’ve identified trade opportunities for each…
Netflix Inc (NFLX)
Netflix accounts for about 1.2% of the Nasdaq 100.
NFLX is toying with my favorite trendline (and it should be yours as well), the 50-day moving average (MA50). This key trendline has been in a bearish pattern since March 22, when its trend shifted into a decline (as shown in the chart below). This indicates that NFLX’s stock-price trend now has a bias toward lower prices for the next 4-6 week.
You’d have to go all the way back to December of 2021 to find the last similarly bearish shift in Tesla Inc’s (TSLA) trend.
Having already seen their earnings report for the quarter, traders have little to look forward to in terms of headlines on the stock, meaning this relative-strength-leading name may be at risk of a break lower as traders take profits from the previously bullish trend.
Keep in Mind, NFLX shares are still trading more than 70% higher than the stock’s price a year ago. By comparison, Apple Inc. (AAPL) shares are trading 7% higher over the same period.
You think there may be some profit-taking pressure on NFLX? I do. I’m targeting a move to $285 over the next 4-to-6 weeks.
Tesla Inc (TSLA)
Tesla shares account for around 3.5% of the Nasdaq 100 Index weighting.
When we read the headlines that Tesla is lowering the price of their vehicles, the company’s trying to send a message… The consumer is weakening, and there’s not much you can do about it.
Unlike QQQ, TSLA is trading at the low end of its range over the last three months. After its earnings, the stock fell to my first level of price support at $160, but after a few weeks of consolidating, it is preparing for another move lower.
The catalyst for lower prices is the shift in sentiment from the analyst community, as TSLA shares have been the target of analyst downgrades after last quarter’s earnings results. Tightening margins, along with consumers’ tightening budgets, do not bode well for the stock’s outlook.
Activity in the options market is starting to form a price target of $140 over the next 4-to-6 weeks, though my charting of the stock suggests that traders may do well to target the $120 price between now and the company’s next earnings call July 19.
Amazon.com, Inc (AMZN)
Amazon accounts for roughly 6.5% of the QQQ weight.
Traders got whiplash following AMZN shares last week after their earnings hit the tape on Thursday afternoon, but the market trend is a little clearer today.
This ticker went into the earnings announcement with one clear task… break above the 200-day moving average (MA200) – and stay there. It’s a task that 69% of the index has completed.
Traders and investors alike were put off by AMZN’s forward-looking guidance, namely in the cloud-computing area, which can be seen as an indication of weakening business activity.
However, unlike TSLA, AMZN shares have a chance at technical redemption.
The stock’s MA50 is trading about 3% below current prices, at $98. The stock should see some technical buying as this critical trendline is tested. That said, a break below the 50-day will trigger more widespread selling of the stock that will target $90.
As the group of experts at Money Morning Live prove, there’s a lot of ways to skin a cat when it comes to trading.
But technical analysis is my bread and butter – it’s how I make money for myself and my Penny Hawk subscribers. They get tailor-made market analysis five days a week sent directly to their inbox, and it’s all focused on identifying lucrative trades.
No matter what the market’s doing, no matter whether it’s an ETF or ticker – there’s always a trade to play.
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May 01 2023