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The Nasdaq must recoup this one level to prevent an even bigger downturn, strategist says

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This is the key level to watch on the Nasdaq, says Matt Maley

Another sell-off in tech stocks Thursday pulled the Nasdaq sharply lower.

The tech-heavy index is now down 10% from its high set in mid-February. That corner of the market has come under pressure as rates have risen and soured investor sentiment for growthier, risk-on stocks.

Matt Maley, chief market strategist at Miller Tabak, said the latest sell-off has violated a key support level on the Nasdaq.

"We've got to watch that 13,000 level. That's going to be key," Maley told CNBC's "Trading Nation" on Thursday.

The Nasdaq fell to 12,533 at Thursday's session lows, though it regained some ground and closed at 12,723.

"It's going to be interesting to see what happens in the next 24 hours because we have the employment number coming out [Friday] morning. If that can cause the yields to come back down, maybe these tech stocks can rally back, and that will be helpful but we need to recover that 13,000 level very, very quickly because that is a key, key support level," Maley said.

He explains that it aligns with a trend line stretching back to March lows of last year as well as the neckline of a head and shoulders pattern. When the index crosses below the neckline, it suggests a change in trend.

"If we don't get a real sharp bounceback over the next two days and we keep meaningfully below those levels, I think that's going to tell us that we still need more downside here before we find a bottom to this sell-off, which is almost 10% already," Maley said.

Even after this week's sell-offs, valuations on the index appear too high to be attractive to Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors. She says the price-earnings ratio should be far lower.

"You're looking at a fair value of 20 times if you look at long-term averages. Now that probably won't get down that low because even forward estimates for earnings still are expecting … 28% earnings growth next year. So I don't think we necessarily have to fall all the way back to 20, but the difference between 30 and 20 is a pretty big difference in terms of a percentage fall," Sanchez said during the same segment.

The Nasdaq traded with a 31 times forward earnings multiple Thursday. It began the week closer to 33 times.

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