Bullish Bells Ringing for Nasdaq-100

The NDX just ended its second-longest stretch above its 50-day moving average

Jun 28, 2017 at 12:52 PM
facebook twitter linkedin

Tech stocks took a major turn for the worse on June 9, and have subsequently struggled to resume their quest for all-time highs. In fact, just over two weeks after the tech-rich Nasdaq-100 Index (NDX) sent up a rare "buying climax" signal, the NDX yesterday rang a bullish bell that hasn't been sounded since 2014, with Google parent Alphabet stock leading a sector swoon after a record fine from the European Union. Below, we'll discuss why stock traders may want to buy the recent tech dip.

Schaeffer's Quantitative Analyst Chris Prybal pointed out that the Nasdaq-100 Index breached its 50-day moving average for the first time in 138 days -- or more than six months -- yesterday. That's the second-longest stretch above this trendline ever, with the longest coming in at 166 sessions back in mid-1995.

NDX chart 50-day

According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been just 12 times since 2000 that the NDX spent at least 63 sessions above the 50-day before a breach, the last two occurring in 2014. That's the longest stretch between signals since the more-than-three-year period from April 2000 to August 2003.

NDX breaches 50-day

Nasdaq-100 Index pullbacks to the 50-day moving average have marked major buying opportunities in the past. One week after a signal, the NDX was up 0.71%, on average, and was higher two-thirds of the time. That's about six times the index's average anytime one-week return of just 0.12%. Two weeks after a signal, the NDX averaged a gain of 1.02% -- roughly four times the norm -- with a slightly higher percent positive.

It's the same story when looking one month after a signal, with the NDX averaging a healthy gain of 2.53% -- about five times its average one-month return of 0.48% -- and higher three out of four times. Three months after a signal, the Nasdaq-100 was up a whopping 5.12%, on average, and higher two-thirds of the time. That's about four times its average three-month return of 1.25%.

NDX after signals

So, if past is prologue, the NDX could be on its way to record-high territory in no time. In fact, the Nasdaq-100 Index was last seen 0.8% higher at 5,715.96, thanks to a broad-market stock rebound. Outside of the NDX, a recent oil signal could point to higher highs ahead for the S&P 500 Index (SPX), too.


If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Stock Pick Report


Special Offers from Schaeffer's Trading Partners