Tech stocks – the darlings of Wall Street’s Artificial Intelligence (AI)-driven boom this year – are starting to lag a little bit. Looking at the chart of the Nasdaq 100, there is no question about the long-term trend which remains bullish. But in the short-term, we have seen a few lower highs form as the index hit an exhaustion level at the end of October, advises Fawad Razaqzada, technical analyst at TradingCandles.
It’s becoming clear that investors may be growing uneasy about how far, and how fast, the AI narrative has carried prices. In recent sessions, it looks like traders have rotated out of growth and back into the safety of defensive and value names.
Is this a sign that risk appetite is wearing thin, or just normal rotation you find in a bull market? I guess time will tell. But as always, take nothing for granted and be on your toes when trading these markets.
The Nasdaq 100 exhaustion zone was around 26,100-26,400. The lower end of this range marks the 161.8% Fibonacci extension level of the last significant downswing. In terms of short-term levels to watch, the lows from the last couple of days have been around the 25,500 zone, which makes it an important level to monitor.
Break that and the hammer head from last Friday’s range at 25,355 is the next stop. The low of that day’s range comes in at 24,709, which is now the line in the sand for me. That’s because if we get to that area, we will have broken a bullish trend line that has been in place since May. Ahead of that level, 25,000 is another important support to watch, should we get there.
