Last week we talked about breaking out of triangle trading patterns. This week started with the NASDAQ popping past the top side of resistance in Jack in the Box fashion – boing!
Stock prices gapped up to start the trading week as the NASDAQ closed trading at 13,480 last Thursday and opened at 13,594 on Monday (the 114-point difference during non-market hours is called a gap in Wall Street lingo).
Monday’s price action delivered a trifecta of bullish technical signals:
- Broke resistance at 13,500ish
- A higher high following a higher low in the current, short-term trend
- And a gap up like we saw in Monday’s trading is generally considered a trend confirmation indicator.
From experience, it’s our opinion the NASDAQ is likely to challenge its 52-week high of 14,175 in the not-too-distant future. That’s doesn’t mean it’s going to be straight up. However, broken resistance tends to convert to support. So, 13,500ish should act as a backstop and attract buyers. Of course, there are always head fakes but if 13,500ish holds, bulls should be in charge in the immediate term.
If we’ve made the correct call, index investors might consider adding an index exchange-traded fund (ETF) like Invesco QQQ Trust (QQQ), which tracks the performance of the NASDAQ 100 on a daily basis.
Last week’s top performers were dominated by tech on our ETF sector/industry watchlist. If our call on the NASDAQ proves to be accurate, then tech stocks should continue to do well. SPDR S&P Semiconductor ETF (XSD) looks a lot like the NASDAQ with the same, triple-play of technical breakout patterns. XSD seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® Semiconductor Select Industry Index.
NVIDIA Corporation (NVDA) is a little on the expensive side at $559.50 as we type. However, the Graphics and Compute & Networking company’s price hasn’t recovered as much lost ground as many of the other SPDR S&P Semiconductor ETF holdings, meaning it could have a little more near-term headroom before bumping into price resistance.
Wall Street has a consensus one-year price target of $641.77 on the chipmaker. (1) That’s roughly 15% higher than where it closed on Monday, April 5, 2021. Analysts forecast earnings growth of 11.8% next year, to $14.99 a share from $13.40 this year. Revenue is expected increase in line with EPS, moving up 11.3% to $24.66 billion from $22.16 billion. (2)
Blue chip tech investors who are looking for semiconductor exposure and don’t mind extra volatility, might consider NVIDIA Corporation (NVDA).
1 – https://finance.yahoo.com/quote/NVDA?p=NVDA
2 – https://finance.yahoo.com/quote/NVDA/analysis?p=NVDA