News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Tech Review: Positive Earnings and Accommodative Fed Lift the Nasdaq 100 Index

Tech Review: Positive Earnings and Accommodative Fed Lift the Nasdaq 100 Index

Richard Snow, Analyst

US Tech 100Talking Points:

  • Large tech stocks out-perform estimates (Apple, Microsoft, Google & Tesla), more results to follow
  • Nasdaq 100 Index builds on yesterday’s momentum, eying a key level of resistance
  • Outlook remains positive for equities as the Fed leaves interest rates and asset purchases unchanged

Major Tech Stocks Provide Earnings Boost

The global lockdown and accommodative central bank policy was always going to benefit the major tech companies but the question was always, how much? It must be noted however, that the sector hasn’t had things all their way in light of the increasing regulatory pressures and the global chip shortage which continues to impact many of the top companies in the index.

Table 1: Large Tech Stocks Produce Positive Surprise

Stock

EPS Estimate

Actual EPS

Surprise (%)

Apple

1.01

1.3

+29.1%

Microsoft

1.92

2.17

+13.26%

Amazon

TBD

TBD

TBD

Alphabet (Google)

19.34

27.26

+40.94

Facebook

3.03

3.61

+19.14

Tesla

0.98

1.45

+47.66

The pick of the bunch still to announce earnings figures include Amazon and Gilead, both companies to release those figures after today’s close.

US Tech 100 - Key Technical Levels

The weekly chart continues to show the dominance of the long-term bull trend ever since the March 2020 low. Crucially, price action now looks to test the 76.4% Fibonacci extension, measured form the 2020 low to the September 2020 high, at 15,163.

US Tech 100 Weekly Chart

Nasdaw 100 weekly chart

Chart prepared by Richard Snow, IG

The daily chart highlights the ascending channel where price action has consistently traded higher over the last two and a half months. More recently, we saw a bounce off channel support with the emergence of what appears to be a bullish engulfing candle – allowing bulls an opportunity to re-enter in the direction of the trend

Find out more about the bullish engulfing candlestick pattern as well as other useful technical tools and techniques via our comprehensive Education Library

A bullish continuation after the pre-FOMC drop would bring the 15,163 level into focus with nothing standing in its way until the 100% Fib extension way up at 16,550.

Should we experience selling from current levels, the most immediate level of support would come in the form of the lower bound of the channel, followed by the recent low of 14,780 and the prior low of 14,450 thereafter.

US Tech 100 Daily Chart

US Tech 100 Daily chart

Chart prepared by Richard Snow, IG

Taper Tantrum – The Potential Looming Threat for Equities

The deeper we go into the economic recovery, the more likely it becomes that the FOMC will begin reducing the amount of liquidity being injected into the financial system and eventually raise interest rates. With US equities currently valued well in excess of their ‘fundamental value’, the possibility of a sharp adjustment lower remains, should the accommodative conditions slow or reverse.

Learn 3 methods to calculate the value of a stock: A Trader’s Guide to Stock Valuation

Keep an eye out for the Jackson Hole Symposium next month and the September FOMC meeting for any hawkish sentiment or mention of policy tightening.

--- Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES