- The Nasdaq 100's rally hinges on breaking key resistance around 19730 to confirm bullish momentum.
- A decisive move above this level would solidify the recent bullish signal ahead of Apple and Amazon earnings.
- Key support lies around 19320; falling below this could challenge the bullish case.
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US index futures were little changed in the early European trade, shrugging off a less dovish than expected Federal Reserve policy decision, mixed tech earnings, and a big drop in Japanese stocks overnight amid the yen’s sharp rally.
All eyes will be on Nvidia (NASDAQ:NVDA) initially to see whether there will be any further upside follow-through after the big surge helped Nasdaq 100, before attention shifts to earnings results from two other tech giants: Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN).
The result of these companies could set the tone for the remainder of the week in what has been a mixed earnings season so far for the so-called “Magnificent 7” group of stocks. With high expectations, any further disappointment could derail the sizeable recovery we saw on Wednesday.
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What now after Nvidia’s big rally?
A big feature of the tech-fuelled rally on Wednesday was Nvidia soaring in excessive of 12% following solid earnings from fellow chip stock Advanced Micro Devices (NASDAQ:AMD) the day before.
Nvidia, now the world's third-most-valuable company, saw its market value surge by a staggering $329 billion on the back of Wednesday’s sharp rally, more than making up a dramatic 7% drop that had erased over $193 billion the day before. All told, the company’s valuation is now an impressive $2.9 trillion.
Nvidia’s impressive gains come after a difficult last few weeks, with the stock breaking some key support areas like $117.00-$118.80, a technically-important zone that it still hasn’t reclaimed completely. Let’s see if the bulls will have the conviction to reclaim this broken support area now.
Apple and Amazon set to report quarterly results
In terms of technology earnings, it is a big one this week. Already, we have seen results from a few of the magnificent 7 giants, delivering mixed results. Today, we will hear from Apple and Amazon. This will keep the tech-heavy Nasdaq 100 in a sharp focus, given we also have monthly US jobs report to look forward to on Friday.
- Apple is anticipated to report earnings of $1.34 per share on revenue of $84.3 billion after the close. Investors will be closely watching iPhone sales, gross margins, and advancements in AI. While iPhone revenue is expected to dip due to increased competition in China, the services segment is forecasted to show strong performance.
- Amazon is expected to announce earnings of $1.01 per share on revenue of $148.54 billion. Analysts will be scrutinizing the growth in e-commerce, advertising, and AWS. Despite a recent dip, Amazon's stock has risen more than 20% this year, indicating a long-term positive trend.
As mentioned, tech companies have so far showcased a rollercoaster of performances. The latest ones to deliver their results included Meta Platforms, Arm, and Qualcomm:
- Meta Platforms (NASDAQ:META) surprised investors with stronger-than-expected second-quarter sales, thanks to its strategic investments in artificial intelligence, which are driving more targeted and personalized advertising. This positive development sent Meta's shares soaring in late trading on Wednesday.
- Arm (NASDAQ:ARM) faced a rough patch as its shares plummeted in late trading. The chip company decided not to raise its annual forecast, sparking concerns about its confidence in future growth. This decision led to an 8% decline in its stock during extended trading.
- Qualcomm (NASDAQ:QCOM) also faced turbulence. Despite a brief post-market rally on Wednesday, investor optimism waned due to worries about a sluggish recovery in the phone market, dampening hopes for a quicker rebound.
Nasdaq 100 technical analysis and trade ideas
Interestingly, the chart of the Nasdaq looks quite similar to that of Nvidia. Both need to show some upside follow-through now to appease the bulls, else with the structure of higher highs and higher lows being dented somewhat, the bears may be lurking around for opportunities.
As the Nasdaq 100 futures chart shows, Wednesday’s rally comes right off the bullish trend line that has been in place since October. The recovery means the index has formed a bullish outside candle on the daily time frame, which wiped out the losses from the day before.
While this is a bullish signal, it comes on the back of a sharp drop lately which took out some key support levels including the area around 19730, which had been support in the past and where we also have the 21-day exponential moving average converging.
So, we will now need to see a decisive break above that area to confirm the bullish signal that was formed on Wednesday. Without follow-through the shape of any individual candlestick pattern should be taken with a pinch of salt.
Meanwhile, the key support area that now needs to hold comes in around 19320, making the high from Tuesday. A daily close back below this area would put the bulls in a spot of bother, especially if the index then goes on to break the bullish trend line.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.