Nasdaq 100 to Blow Off the Double Top As Builds Pressure on the 12,400 Level

Summary:

Nasdaq 100 on track to break the double top at 12,400. The market puts pressure at the highs as the bullish momentum behind equities continues to grow.

Nasdaq 100 cannot let go of the highs despite the fact that the recent developments on the pandemic front led to some selling. More precisely, by the time that Pfizer announced a potential vaccine with an efficiency of over 90%, some investors sold tech companies.

Furthermore, some other investors rushed into concluding that a rotation started. Namely, a rotation from value to growth, arguing that the tech sector acted as a hedge against the pandemic. It makes sense if we consider that all the “work-from-home” stocks have overperformed since March. Think of Amazon, Microsoft, Facebook, Google, or Zoom – to name a few.

Pfizer Revised Its COVID-19 Vaccine Efficacy Higher

In the meantime, the race against the pandemic gains ground. Moderna announced two days ago that its vaccine candidate shows efficiency of over 95%. Good news followed by more good news – Pfizer and BioNTech announced today that they revised higher the efficacy of their vaccine to 95% too. Therefore, pending FDA approval, the light at the end of the tunnel becomes more and more visible by the day.

Nasdaq 100 Double Top Formation?

The Nasdaq 100 index formed an interesting pattern at the 12,400 level. More precisely, a possible double top.

A quick look at the chart below shows that the index reacted negatively to the initial vaccine news. Unlike the Dow Jones and the S&P500 that made new highs (remember the value/growth rotation mentioned earlier?), Nasdaq 100 declined on the news.

However, buyers digested the info, and by now, the good news is priced in. After all, the world’s dependency on technology will not stop at the end of the pandemic. Just the opposite – digitalization has just started.

The point here is that the recent bounce from the lows looks constructive enough for the index to try to blow the double top off. If that is the case, bulls may want to buy the new high, place a stop at the previous higher low, and target a risk-reward ratio bigger than 1:2.