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Nasdaq 100 is flashing a signal that suggests a looming pullback, chart analyst says

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Here's where the tech-heavy Nasdaq 100 heads next

A rush of tech earnings this week has placed the Nasdaq 100 at a critical crossroads.

The QQQ ETF, which tracks the tech-heavy Nasdaq 100, will see nearly one-quarter of its components report earnings on Wednesday and Thursday, alone – Microsoft and Facebook were among those that released results Wednesday, and Amazon and Apple are set to report Thursday afternoon.

The Nasdaq 100 has held up better than the broader market — the QQQ ETF has risen 3% in 2020 compared with a 9% drop for the S&P 500.

Recent moves could foreshadow a change in fortune, though, Miller Tabak chief market strategist Matt Maley said on CNBC's "Trading Nation." 

"Just recently the QQQ saw what's called an outside-down day, and that's when you get a higher high than the previous day's high, a lower low than the previous day's low, and a close below the previous day's low," he said Wednesday. "That may seem like something that may happen often but actually it doesn't and it usually shows a sign of exhaustion."

He also said it suggests that buyers have been tapped out and a short-term pullback of at least 3% or 4% could be on the horizon.  

"That doesn't mean that the group is topped out for a long-term disaster, but it does tell me that I think that investors don't want to chase these stocks up here and [investors should] let them come back down from their overbought technical position and come to you," said Maley.

Amazon, Apple and some other top stocks in the Nasdaq are in good shape for the long term even if they see a short-term pullback on earnings, says Michael Bapis, managing director at Vios Advisors at Rockefeller Capital Management.

"Earnings have been reset. You're going to see probably one to two quarters of earnings that nobody can decide what it means," He said in the same interview. "You may see a small pullback like Matt mentioned possibly because it's run up so high and the market has run up pretty quickly off its lows. That being said the revolution that we're in the middle of,  that has gotten accelerated for technology with Apple, Amazon, Facebook, Google, Microsoft." 

Instead, Bapis sees these stocks as buys over a longer three- to 10-year time horizon. Even with weakness this year, stocks like Apple and Microsoft have held onto solid gains in the past decade. Apple is up nearly 650% and Microsoft 472% over that time frame.

Disclosure: Bapis and Vios own shares of Apple, Alphabet, Facebook and Microsoft.

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