Nasdaq a buy on the dips? [Video]

Giles Coghlan LLB, Lth, MA Financial Source

The Nasdaq is approaching a very strong time of the year. Over the last 35 years, the Nasdaq has risen 26 times between April 14 and June 05. The largest gain was in 2003 with a +18.85% return. The biggest loss was -13.12% in 2010. One major factor to consider is that the Nasdaq is largely driven by tech stocks. Apple, Microsoft, Amazon, Tesla, and Facebook are the 5 largest members of the index.

You can see that the index is heavily concentrated with technology companies but also includes companies from other sectors. It is often used as a barometer of the health of the technology sector. Over the COVID-19 induced lockdowns the NASDAQ has seen very strong gains as the so-called ‘stay at home’ stocks saw investor demand. As the world went digital the Nasdaq has gained.

Trade risks

There is a growing risk that investors consider equity markets overbought and that could see a correction. It is hard to know when that correction will come, but investors need to be aware of the potential risk.
There is an upside risk that another break out of COVID-19 could speed up further growth from tech stocks.
Any delay in the US stimulus packages could result in general weakness in the US stock market. The Nasdaq would also suffer sharp losses in such an event.

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Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

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