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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 12 June 2017 at 12:30 GMT

US tech stocks fell off a cliff

Technical Analyst / Saxo Bank
Denmark
  • Tech-heavy Nasdaq 100 index dropped sharply on Friday
  • Similar drops have occurred not long ago
  • The question is if a bigger correction lies ahead or the rising trend is still intact
  • A close below the rising trendline could lead to a test of support around 5,550
  • A close below that level would point to a test of stronger support around 5,300

Google on Apple
Stocks the likes of Google and Apple fell steeply on Friday. Photo: Shutterstock

By Kim Cramer-Larsson

First the bigger picture: the Nasdaq 100 hit the 1.236 Fibonacci projection of the dot-com bubble deflation at around 5,800 points and the upper rising trendline. Massive divergence is being seen on the relative strength index (RSI), indicating imbalance in the market. 

Nasdaq 100 Monthly
Source : Saxo Bank

A massive selloff of shares in big tech companies caused the Nasdaq 100 to drop almost 2% on Friday. Big names such as Apple, Amazon, Facebook and Google dropped between 2% and 5% — some even more.

It was the second time in just a few weeks the index got hit by a heavy selloff. There have been warning signs though. The RSI has been showing divergence since early May, so this bull market has been a bit stretched, and last week a Doji evening star candlestick formation was created on the chart.

The Nasdaq tested the rising trendline, but managed to close above. The question is whether this line will hold.

Nasdaq 100 Daily
Source : Saxo Bank

A look at the Nasdaq future can give us some kind of indication here. It currently points to a lower opening and possible break of the rising trendline.

A close below could very likely take the index to test support at around 5,550 points. A close below this level and Nasdaq is officially in a bear market short term, which most likely would lead the index to test stronger support at around 5,300. 

Nasdaq 100 Future Daily
Source: Saxo Bank  

— Edited by Clemens Bomsdorf


Kim Cramer Larsson  is a technical analyst at Saxo Bank




2y
AlexF AlexF
5741 it is then....
2y
Ryan786 Ryan786
Could you please throw some light on SPX, Mr. Larsson ?

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