Market Insights

Last year saw dramatic rallies in smaller technology stocks like Nio and Snap. This month, several of those same companies have the same potentially bullish chart pattern.

The table below lists companies whose 50-day moving averages recently crossed above their 100-day moving averages. It was compiled using TradeStation’s Scanner program and a custom indicator.

This chart pattern suggests that longer-term momentum is turning bullish following several months of weakness. We know this because a stock must have spent time below its 100-day MA for its shorter-term 50-day MA to have fallen below it. The pattern is a variation of the more popular “Golden Cross” involving the 50-day MA and 200-day MA.

Many of these growth stocks rallied more than 500 percent from their lows last year, fueled by a combination of positive catalysts. One was their real organic growth. After all, these companies mostly had disruptive products in new markets like cloud-computing, e-commerce and digital payments. Some of those businesses grew even more quickly last year because of the shift to remote work. As high-multiple growth stocks, they also benefited from the collapse in interest rates after coronavirus shut down broad swathes of the traditional economy.

Growth vs Value

The trend reversed in late 2020 as investors flooded back to reopening plays. Old-fashioned stocks like financials and energy, often trading at steep discounts, soared. Expensive growth stocks, like the members of this list, staggered. But conditions have changed in the last two months as interest rates reversed and megacap growth stocks like Apple (AAPL) and Amazon.com (AMZN) broke out.

Those large companies are members of the Nasdaq-100, tracked by the Invesco QQQ Trust (QQQ). Many of the smaller companies cited in this article are members of the Invesco Next Gen 100 (QQQJ), whose 50-day MA rose above its 100-day MA seven sessions ago. Given their smaller size and lesser prominence, some of these companies may appeal to longer-term growth investors.

In conclusion, sentiment has recently shifted back toward growth and away from value. Most of the rallies so far have occurred in the largest names like AAPL, but now technical conditions may be favoring smaller and faster-moving names.