Microsoft, Meta Driving Tech Comeback as Nasdaq Flashes 'Huge' Buy Signal
The Nasdaq 100, Microsoft and Meta Platforms are telling investors the same story.
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Tech stocks just received a very bullish signal.
We often speak of red flags in the market, but investors are seeing a green flag right now, if they know where to find it.
Knowing where to look is the key. Time frames matter. Usually, we observe stocks and indexes on daily charts, but this positive signal exists on a longer time horizon.
It can be argued that monthly time frames take precedence over daily charts. That’s because more time, more information and more capital goes into the formation of a single monthly candle compared to a weekly or daily candle.
If that’s the case, then we are seeing a huge buy signal on the monthly chart of the Nasdaq 100, in the form of an impressive hammer candle (arrow).
This isn’t just any buy signal. To understand why, consider the story the April candle is telling.
At one point during the month of April, that candle was red, all the way down to the bottom of the thin part of the candle, known as the wick. The bears were in charge, the bulls were on the run, and the Nasdaq 100 was trading at its lowest level in over a year.
Then came the stampede. The bulls regained all of the previously ceded territory, and more. The Nasdaq 100 closed green for the month.
How do the bears and the shorts feel now? They’ve been burned. It’s like putting your hand on a hot stove — and the longer the wick on that candle, the hotter the stove.
Bears and shorts are licking their wounds and counting their losses. I doubt they’re spoiling for another battle.
Two of the most prominent stocks on the Nasdaq 100 are Microsoft MSFT and Meta Platforms META. Those stocks agree with the sentiment expressed by the Nasdaq 100. Both names crushed earnings after Wednesday’s close.
Microsoft has basically been adrift for the past six months, as demonstrated by the directionless activity of its 50-day (blue) and 200-day (red) moving averages. Thursday’s open should see Microsoft trade above its 200-day moving average for the first time since January.
Prior to Thursday’s open, Microsoft was down 5.5% year to date. Earnings-related buying should boost the stock into positive territory for the year.
Meta Platforms, which is down 8.3% year to date, will also see a boost. Meta has seen considerable profit taking this year, on the heels of a 65% gain last year, and a whopping 194% rally in 2023.
Like the April hammer pattern on the Nasdaq 100, the strong earnings reports from Microsoft and Meta Platforms tell a story. It's the same story. Tech stocks could be on the verge of major comeback.
At the time of publication, Ponsi was long MSFT and META.
