The Nasdaq 100, with its heavy focus on technology, is in a curious position right now. It is testing an essential line of support in terms of price, and whether or not it holds will give you a better idea of how American growth stocks will fare going into the end of the year.
The 200-week moving average has been a consistent marker for the Nasdaq for over 20 years. When the index falls below that support level (red circles), it has typically led to a much sharper decline.
This happened in February 2001 (the dotcom crash) and September 2008 (the global financial crisis), when the index fell an additional 60% and 40%, respectively.
On the other hand, whenever the index bounces off the moving average trend line (green circles), it often marks the start of a major rally – as it did in early 2020 after the Covid crash, for example, when it shot up by about 150%.
Back then, there was no inflation problem, and the Federal Reserve’s lower interest rates and bond-buying programs were attracting investment that would boost the index even higher. The central bank is now taking the opposite approach, raising interest rates and reining in liquidity.
Even though many big funds, traders, and trading algorithms will be closely watching the 200-week moving average over the next few weeks, if the index is still above that key line at the end of those weeks, they’ll be betting on a big rally into the end of the year.
The Nasdaq 100 CFD is an easy way to bet on the Index recovery. However, if the Nasdaq breaks below the defence line, you might want to hold off on going long in growth stocks, as they could go a lot lower in this case.
Hence, a good opportunity could be to extend the short positions on Nasdaq (that we hope you took based on this insight), as well as stay in a long USD position for a little bit longer. Just remember not to overextend your margin for these longer-term moves.
In other words, don’t be greedy with leverage on either Nasdaq CFD or USD-related forex pairs regardless of whether it’s a short or a long position; understand and stick to the timeline of your trades and keep in mind that the bottom can be closer than you think; Wyckoff Method is one tool that you can use to assess its likelihood.
Team of Elite CurrenSea 🇺🇦❤️