Investors on alert after huge Nasdaq 100 intraday drop

As investors wait for a tech heavy earnings day on Wednesday, the Nasdaq 100 index – which is primarily made up of tech heavy companies – dropped significantly at the opening bell on Tuesday.

Investors could be trimming the extreme long positions in the sector before earnings announcements from Apple, Amazon, Facebook and Google on Wednesday.

These companies represent around 17% of the entire S&P 500 index and about a third of the Nasdaq 100 index.

Source: Admirals MetaTrader 5, NQ100, Weekly – Data range: from May 4, 2014, to Jul 27, 2021, performed on Jul 27, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.

The weekly price chart of the Nasdaq 100 index shown above, highlights a very strong long-term uptrend.

Since rejecting the 100-period (green) exponential moving average in March 2020, the index has surged higher often finding support at the 20-period (blue) exponential moving average (EMA).

Currently the price is trading far away from the 20-period EMA, suggesting it is overextended and due a pullback at some point.

Source: Admirals MetaTrader 5, NQ100, H4 – Data range: from Jun 14, 2021, to Jul 27, 2021, performed on Jul 27, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.

The 4-hour chart shown above highlights the biggest intra-day drop for some time took place at the opening bell on Tuesday (second candle in from the right).

Market veterans understand that markets move on anticipation and reverse on the facts. It’s why this week is a big deal for the index and whether the price can find support at the 4-hour 100-period EMA.

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