Disclaimer: I still learning about Technical Analysis, so sorry in advance by any mistakes in my analysis.
Since the market started to rebound I was asking myself why Nasdaq was outperforming other indexes, so I tried to take a Technical and Fundamental approach to have a clear view on the matter.
Technical Analysis: Looking at the whole history of the Nasdaq price we can trace an Elliott impulse wave cycle (Waves -1, 2, 3,4,5) at the monthly chart where Wave 2 was confirmed when retraced almost 85.4% of the Wave 1, so this energy of the buyers at the Nasdaq can be justified by the continuation of the Wave 3 that has the following targets.
* 161.8% of Wave 1 - 8,414.6 (Level superpassed)
* 200% of Wave 1 - 10,213.4
* 261.8% of Wave 1 - 13,123.7
* 323.6% of Wave 1 - 16,033.9
A wave 4 is hard to define right now until we lose this uptrend, but once we lose I will post an update with the possible targets since Wave 4 is typically 14.6%, 23.6%, or 38.2% of Wave 3.
Fundamental analysis: The reason that seems to keep Nasdaq almost unscathed from this bloodbath that the COVID-19 pandemic triggered across the markets, its the composition of the Nasdaq index and the intrinsic characteristics of this economic crisis on the companies earnings.
Nasdaq is majority compounded by the Technology sector (49.56%), also by:
* Consumer Services - 19.81%
* Health Care - 10.85%
* Industrials - 6.17%
* Consumer Goods - 5.74%
* Financials - 5.60%
* Telecomunications - 0.97%
* Utilities - 0.68%
* Oil & Gas - 0.38%
* Basic Materials - 0.25%
With the stay at stay-at-home order, the companies that less suffered and even were benefited by the situation was from the Tech sector, also as consumers started to hoard medicines and prophylactics goods, and investors aimed to profit over the discovery of a vaccine or feasible treatment to the Coronavirus, the Health sector also saw a surging in profitability, a context that gave an edge for Nasdaq over other Index more exposed to the Industrial and Utilities sectors, which saw a severe downside in profits and an increase of liabilities.
Other factors such as all Trillions ($) in stimulus packages that the U.S government and the Federal Reserve injected into the market and the "Optimism" built around the re-opening of the economy also can be attributed to justify this fast recover.
"We don’t put out this fire by pouring water on it. But by sucking the oxygen out of the room. Slowly. Invisibly. Completely." - Bobby Axelrod
A homage to the return of Billions Show
Please feel free to share your comments and perspectives below, I'm still grinding my way to improve my analysis, so all feedback is welcome.
Since the market started to rebound I was asking myself why Nasdaq was outperforming other indexes, so I tried to take a Technical and Fundamental approach to have a clear view on the matter.
Technical Analysis: Looking at the whole history of the Nasdaq price we can trace an Elliott impulse wave cycle (Waves -1, 2, 3,4,5) at the monthly chart where Wave 2 was confirmed when retraced almost 85.4% of the Wave 1, so this energy of the buyers at the Nasdaq can be justified by the continuation of the Wave 3 that has the following targets.
* 161.8% of Wave 1 - 8,414.6 (Level superpassed)
* 200% of Wave 1 - 10,213.4
* 261.8% of Wave 1 - 13,123.7
* 323.6% of Wave 1 - 16,033.9
A wave 4 is hard to define right now until we lose this uptrend, but once we lose I will post an update with the possible targets since Wave 4 is typically 14.6%, 23.6%, or 38.2% of Wave 3.
Fundamental analysis: The reason that seems to keep Nasdaq almost unscathed from this bloodbath that the COVID-19 pandemic triggered across the markets, its the composition of the Nasdaq index and the intrinsic characteristics of this economic crisis on the companies earnings.
Nasdaq is majority compounded by the Technology sector (49.56%), also by:
* Consumer Services - 19.81%
* Health Care - 10.85%
* Industrials - 6.17%
* Consumer Goods - 5.74%
* Financials - 5.60%
* Telecomunications - 0.97%
* Utilities - 0.68%
* Oil & Gas - 0.38%
* Basic Materials - 0.25%
With the stay at stay-at-home order, the companies that less suffered and even were benefited by the situation was from the Tech sector, also as consumers started to hoard medicines and prophylactics goods, and investors aimed to profit over the discovery of a vaccine or feasible treatment to the Coronavirus, the Health sector also saw a surging in profitability, a context that gave an edge for Nasdaq over other Index more exposed to the Industrial and Utilities sectors, which saw a severe downside in profits and an increase of liabilities.
Other factors such as all Trillions ($) in stimulus packages that the U.S government and the Federal Reserve injected into the market and the "Optimism" built around the re-opening of the economy also can be attributed to justify this fast recover.
"We don’t put out this fire by pouring water on it. But by sucking the oxygen out of the room. Slowly. Invisibly. Completely." - Bobby Axelrod
A homage to the return of Billions Show
Please feel free to share your comments and perspectives below, I'm still grinding my way to improve my analysis, so all feedback is welcome.
Comment:
200% - TARGET ACHIEVED
Comment:
261.8% - TARGET ACHIEVED
Be careful and have nice trades.