Originally published by guppytraders.com
Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOGL) – the FANG stocks – have an inordinately large weighting on the Nasdaq so any change in their financial health has a disproportionate impact on the index, both bullish and bearish.
But is it fatal? Are the ructions a precursor to another tech crash?
There are three defining features on the Nasdaq chart. All of them suggest that talk of a tech crash is unjustified.
The first defining feature seen on the weekly Nasdaq chart is the consistent trend strength shown by the Guppy Multiple Moving Average (GMMA) indicator. This indicator captures the thinking of investors and traders. Wide separation in the long term group of averages confirms strong investor support for the trend. This consistent wide separation is a characteristic of the Nasdaq since late 2016.
The second feature is the degree of separation between the short term and long term GMMA. This is a measure of trend stability and militates against sudden trend changes. The chart shows steady and consistent separation with trading activity having essentially no impact on underlying investor confidence.
The third feature is the simple but effective trend line. The line starts in mid- 2016. It was briefly broken in April 2018 but for the past few months the line has regained its role as a support feature for the rising trend.
None of these features suggest the probability of any change in trend. These all confirm a high probability the uptrend will continue. This combination of features suggest the Nasdaq could fall to below 7400 and still remain in a strong uptrend.
In addition there are no end of trend features on the chart. There is no evidence of a double top, a rounding top pattern or the development of a head and shoulder reversal pattern. Some may point to an Relative Strength indicator divergence but closer examination shows this RSI divergence signal has been generated multiple time since 2009 and has not led to a collapse of the Nasdaq uptrend.
Daryl Guppy is a leading international financial technical analysis expert and special consultant to Axicorp. Guppy appears regularly on CNBC Asia and is known as "The Chart Man". Disclaimer: Daryl Guppy is not a financial advisor. These notes are for educational purposes only and provide an example of applied technical analysis.