Nasdaq 100 Outlook:
- The Nasdaq 100 trades near all-time highs but a gap below leaves the Index vulnerable to short-term declines
- Pepsi (PEP) is the Nasdaq’s 10th largest constituent by weight, accounting for roughly 2.2% of the Index
- The consumer-defensive beverage stock has outperformed the S&P 500 in the year-to-date, boasting a 20% return in the period
Nasdaq 100 Outlook: Gaps Lurk Below, Pepsi (PEP) Earnings on Tap
The Nasdaq 100 traded lower after a price target downgrade on Apple weighed on the tech-heavy Index. With Monday trading concluded, the Index will now look to quarterly earnings from Pepsi (PEP) to influence sentiment and guide price on Tuesday. While the consumer-defensive stock is not typically viewed as an influential member of the Nasdaq, it is the 10th largest component on the Index by weight at roughly 2.2% – beating out tech stocks like Netflix and Nvidia.
Consequently, PEP has the potential to be a significant catalyst for the Index on Tuesday trading, with little on the calendar by way of earnings or economic events ahead of Wednesday’s FOMC meeting minutes. The company is expected to report earnings of $1.49 per share on revenue of $16.42 billion. Pepsi has beat EPS estimates in 11 of the past 12 quarters and shares have climbed after 8 of the past 12 earnings announcements.
That said, the implied 1-day earnings-related share change is muted at just 2% – significantly less than other Nasdaq names like Micron (MU) which saw an earnings-related implied move of 8.5%. Therefore, the resultant price range is a mere $5 from $129.63 to $134.91. Despite the tight range, the pop-producer has nearby technical levels to negotiate if it is to post a substantial move in either direction.
Trading at $132.3, PEP is within reach of all-time highs around $135.2 – narrowly outside the earnings-implied price move. That said, no clear-cut resistance exists between the two levels which could encourage bulls to push higher on the back of an earnings beat. On the other hand, Pepsi enjoys nearby support within the implied range at $131. The level offered resistance in May, while more-recently supporting prices in June and July.
Pepsi (PEP) Price Chart: Daily Time Frame (June 2018 – June 2019)
With that in mind, topside targets look attractive from a technical perspective but do not exist without risk. Regardless, Pepsi looks poised to drive sentiment for the Nasdaq 100 on Tuesday – a role that carries greater weight than a single stock move could hope to control.
Nasdaq 100 Price Chart: 4 – Hour Time Frame (April – July) (Chart 2)
When exploring positions on the Index, traders should be wary of a gap beneath the current trading price – which could exacerbate declines if bearish price action takes hold – from 7,738 to 7,678. Moderate technical support exists beneath the gap at 7,660. For updates and analysis on Pepsi and other stocks during earnings season, follow @PeterHanksFX on Twitter.
–Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX