Nasdaq 100 Price Forecast:
- A strong quarter from Microsoft saw the tech giant beat analyst expectations on both revenue and EPS
- As a significant part of the Nasdaq, the encouraging report and subsequent share price reaction should help steady the tech-heavy index ahead of other corporate results
- The Nasdaq 100 is Poised for a Volatile Week as Key Earnings Arrive
Nasdaq 100 Outlook Steadied as Microsoft Beats Earnings Expectations
Microsoft announced their quarterly results after Tuesday’s close, revealing yet another impressive quarter. The company beat on both revenue and earnings per share expectations, fueled by cloud and video game sales. Ad sales, however, continue to serve as a soft spot for Microsoft and companies pull back advertising budgets amid the pandemic. Still, Microsoft shares enjoyed a modest gain after the market close.
Microsoft Stock Price After-Hours
Source: Marketwatch
Beyond Microsoft shareholders, the report is an encouraging building block for the broader Nasdaq 100 and other tech giants, as it could help create some price stability headed into the rest of the week. After an abysmal report from German software giant SAP on Monday, the expectations around big-tech companies were undoubtedly a little shaky.
From an option holder’s perspective, the report leaves a lot to be desired as the actual post-earnings price move read in at just 0.3% compared to an implied move of more than 4%. As previously noted, the looming election could contribute to a lack of follow-through from earnings reports as traders hold their breath ahead of November 3. Consequently, option-selling strategies that lend themselves to periods heightened implied volatility could prove appropriate for the current environment.
Over the longer-term, the report may serve a positive development for Microsoft and its shareholders as the core business looks to be in good health. While arguments can be made against the sustainability of current some stock valuations, it seems MSFT delivered what is required of the biggest tech names and that should serve the Nasdaq well going forward.
Nasdaq 100 Price Chart: 1 - Hour Time Frame (September 2020 – October 2020)
To that end, the Nasdaq may continue to negotiate the 11,600 level which has shown an ability to serve as both support and resistance in recent days. Either way, the looming event risk of the election might make it difficult to establish a clear-cut trend. If price does begin to distance itself from 11,600, initial resistance might reside around the 11,782 mark with potential support near 11,360. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
--Written by Peter Hanks, Strategist for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
