Nasdaq 100: Triple Tops Rarely Hold

nasdaq 100
nasdaq 100

Nasdaq 100 outperformed its peers in 2020 – it made a new all-time high after the March plunge in the U.S. stock market. Moreover, the rotation into tech stocks from investors from all over the world continues to generate a strong bid on the Nasdaq 100 index.

Last week’s big tech Q2 2020 earnings revealed much better than expected results. Google, Amazon, Apple – they all beat their expectations, pushing the stock market indexes higher. Not only Nasdaq 100 gained, but the S&P500 or the Dow Jones too.

Nasdaq 100 Earnings Season Continues

Now that the big tech reported their earnings, it does not mean that the season ended. Disney reports this week, as well as other names like Square, Humana, or Moderna.

However, the big tech names are likely to continue to dominate the way the market moves. If anything, Nasdaq 100 owes its all-time record in 2020 to the big tech group led by Amazon and Apple.

Nasdaq 100 Possible Triple Top

The 11,000 level proved so far to be difficult to break by Nasdaq 100. For the past three weeks, the index struggles at the area, stabbing new highs, albeit only marginal ones.

Moreover, the three attempts at the area draw attention as bears call for a triple top. A reversal pattern, it points to a sharp drop in the Nasdaq 100 index.

However, savvy investors have a saying – triple tops rarely hold. Because triple tops (or bottoms, as a matter of fact), form against horizontal resistance, they merely show a market that builds energy before overcoming the level.

In other words, the three attempts at the 11,000 level resemble more with a triangular consolidation (suggesting continuation), rather than a reversal pattern.

How to trade it? First, focus on the invalidation point. If Nasdaq 100 manages to drop more than 10,500, the triple top scenario makes sense. Hence, that level would act as a stop-loss order for any long from current or lower levels.

Second, find the take profit level by projecting twice the distance from the entry until the 10,500. That’s a new all-time high.

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Nasdaq 100 Price Forecast

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