Long-term, Intermediate-term, and Short-term Technical Outlook of COMPQ
Many remain cautious about tech and telecom stocks, growth names, and the over-the-counter market. Some compare November 2021 to May 2022 cyclical bear decline to the 2000-2002 tech/telecom dot.com bubble. Remember, the 2000-2002 bear market witnessed the Nasdaq Composite Index (COMPQ) losing nearly 80% of its overall value. The mega-cap technology-laden Nasdaq 100 Index (NDX) also plummeted by around 85%.
It is difficult to know if this will occur, but COMPQ and NDX have lost nearly one-third of their value in the past six months. Tech and tech-related names have been pounded mercilessly for the last six months since achieving all-time highs in November 2021. COMPQ and NDX suffered massive technical damages during the decline. Below the surface, many of the smaller to mid-size tech/telecom Nasdaq names are down more than 50% from their respective peaks.
The question is whether the larger-cap Nasdaq names that have not suffered the same magnitude of selling as their smaller-cap Nasdaq counterparts catch up with peers? Or will the larger market-cap-weighted Nasdaq save the OTC and the listed markets by recovering?
Attached are the long-term (monthly chart), intermediate-term (weekly), and short-term (daily) technical outlooks of COMPQ. Enclosed below are technical views based on the three timeframes.
Long-term Technical Outlook (Monthly Chart)
The breakout above 10,542 (Jul 2020) confirmed an accelerated channel breakout, prompting an explosive COMPQ rally toward 16,212.23 (Nov 2021 all-time high). An overbought condition coupled with violations of the 10-month ma (13,9975), top of 2010 uptrend channel (13,135), and the 30-month ma (12,498) warns of a COMPQ top. The Nov 2021-May 2022 cyclical bear decline to 11,035.69 or -5,176.54 points (-31.92%) may be nearing an inflection point. There is critical COMPQ support at the Jul 2020 accelerated channel breakout (10,542), the 38.2% retracement (10,502.59) from the Mar 2009-Nov 2021 rally, and the bottom of the 2010 uptrend channel (10,060).
In the past decade, after significant rallies resulting in overbought conditions (RSI above 70), COMPQ has consolidated its gains through 2-year sideways trading ranges (i.e., 2011-2013, 2015-2017, and 2018-2020). The consolidations alleviated overbought conditions, allowing for the resumption of the structural bull. Will another 2-year consolidation phase between 10,060 and 10,542 alleviate an overbought condition and set the stage for the resumption of the structural bull? Key initial resistance 12,498 (30-month ma) and secondary resistance is 13,975-14,135 (top of 2010 uptrend channel and 10-month ma).
The monthly MACD momentum indicator has fallen to its 2020 breakout. Will price momentum bottom and rebound from this critical support? The monthly RSI indicator (45.49) has found support near 50 (neutral) several times (5) over the past 12-years. Will RSI find support here? Or will RSI decline toward the overbought level below 30 to challenge the 2008-2009 timeframe?
Intermediate-term Technical Outlook (Weekly)
COMPQ has peaked earlier and fallen sharper than other US stock market indexes. It peaked at 5,176.54 in Nov 2021 and has declined 31.93%. From the Nov 2021 top (16,212.23), there have been three negative outside weeks, a violation of the 2021 uptrend channel (below 15,020), and witnessed a head and shoulders top breakdown (below 12,397/13,002.5). The neckline 1/2 breakdown suggests -3,210 to -3,815 points or downside risks to 8,582-9,793. Also, a downtrend channel remains intact between 11,573 and 13,787. After briefly breaking the bottom of its downtrend channel in early-May 2022, the ability to find support above its critical 61.8% retracement (10,291.29) gives the COMPQ bulls hope of recovery. However, the oversold rally must clear above initial resistance at 12,397-12,593 (Neckline 2 and the 10-week ma) and secondary resistance at 13,002.5-13,095 (Neckline 1) to confirm the May 2022 low as a bottom. Failure to breakout above the two resistances warns of a deep cyclical bear decline.
The weekly MACD price momentum indicator continues to decline, setting a lower low below its Mar 2020 bottom. The sharp decline warns of a significant loss in momentum with no signs of abating. The weekly RSI overbought/oversold indicator (36.59) attempts to rebound from the Mar 2020 low (26.35). However, RSI must trade above the Mar 2022 high (49.10) and the neutral level (50) to confirm the May 2022 low (11,035.69) as a bottom.
Short-term Technical Outlook (Daily)
Violation of neckline support at 12,397-12,587 (Mar 2021 and Feb/Mar 2022 lows) confirmed a COMPQ top. Also, violation of the bottom of the Oct 2021 downtrend channel (11,616) warns of further volatility. Initial support is 11,036-11,109 (5/12 and 5/20/22 pivotal lows). The ability to find support here coupled with an oversold condition signals another oversold rally. Initial resistance is 11,988-12,202 (5/2/22 low and 5/17/22 high) and above this 12,414-12,588 (38.2% retracement from the Mar-May 2022 decline, 4/29/22 breakdown, and Feb/Mar 2022 lows), 12,847-13,265.5 (50-61.8% retracement from Mar-May 2022 decline, 38.2% retracement from Nov 2021-May 2022 decline, 5/1/22 high, Feb 2022 breakdown, and 50-day ma). A breakout here is technically significant as this confirms the next sustainable COMPQ rally to 13,624-13,837.5/13,952-14,181 (3/3 and 4/21/22 highs and 4/6/22 gap-down/top of Jan 2022 downtrend), and 14,235-14,647 (61.8% retracement from Nov 2021-May 2022 decline, Feb/Mar 2022 highs, top of the Nov 2021 downtrend channel, and the 200-day ma).
Daily MACD price momentum may have bottomed on 5/12/22, prompting a technical bounce. The challenge is to breakout above the top of the Nov 2021 downtrend channel to confirm the 11/23/22 price low as a near-term bottom. The daily RSI indicator (48.66) has rallied from the oversold level (30) and is testing the crucial neutral level (50). The ability to breakout above 50 can extend the oversold rally toward Mar 2022 high (64). However, failure to surpass 50 warns of another COMPQ pullback.