Nasdaq 100 Stocks that Have Not Broken Out

July 25, 2014 9:30 AM

We discussed the strength in large-cap technology in today’s MorningWord:

Interestingly, tech has been the strongest sector among the mega cap stocks reporting earnings so far, while industrials and consumer staples stalwarts have struggled after their reports.  That’s been reflected in the strength of the Nasdaq over the past 3 months, and the index has held up much better even as small cap and momentum stocks have struggled again in July:

Nasdaq 100 Index (red) vs. Russell 2000 index (green) daily chart, Courtesy of Bloomberg

Of course, as we’ve noted on many prior occasions, the few mega cap stocks are pulling a lot of weight in the major indices, especially in the Nasdaq 100.  AAPL, MSFT, INTC, and GOOG make up more than 30% of the index, making up for the vast majority of smaller-cap stocks that are struggling.

For an illustration of just how few Nasdaq stocks are making a new 52 week high, even as the Nasdaq index continues to make new highs, here is a chart from Dana Lyons (full post here):

Screen Shot 2014-07-25 at 10.55.10 AM

As we discussed, the mega caps are clearly driving the rally over the past couple of months, as smaller issues lag.

Within the top 50 stocks in the Nasdaq 100 index, which are the bulk of the weighting for the index as a whole, these are the stocks that have made a new 52 week high at some point in the past month:

AAPL, MSFT, INTC, FB, GILD, QCOM, CMCSA, CELG, MDLZ, BIDU, MU, KRFT, VIAB, AMAT, NFLX, INTU, WDC, VRTX, ILMN, SNDK, BRCM, GMCR, MAR.

Those leaders are the reason why the index looks so strong while the individual issues remain weak.  As a result, if we do see some weakness in the broader indices in the coming weeks, these leaders are likely going to be the last to finally break down.

In contrast, the following top 50 stocks in the Nasdaq have failed to make a new 52 week high in the past month:

GOOG, AMZN, CSCO, AMGN, BIIB, EBAY, PCLN, SBUX, COST, TXN, ESRX, FOXA, DTV, ADP, YHOO, ADBE, ALXN, CTSH, REGN, TSLA, PCAR, SIRI, WYNN, STX, MYL, CERN

They are likely to break down more severely if the Nasdaq 100 does in fact pull back.

AMZN and SBUX are the big leaders to the downside on the lower list, but there are many other names on the list that have not made any progress in the past 6 months, such as AMGN, EBAY, PCLN, ESRX, FOXA, YHOO, and WYNN.

The rising tide has not lifted all boats in 2014.  When the tide eventually pulls back, the laggards are likely to be the most exposed.

This post by Enis Taner (@enistaner) originally appeared on RiskReversal.com

View Comments (2)

Recommended for You