Tech Turnaround Should Ring Familiar to Whipsawed Investors

(Bloomberg) -- If the rebound in U.S. technology stocks from their jarring recent declines isn’t giving investors a sense of deja-vu, it probably should be.

The biggest exchange-traded fund tracking the tech-heavy Nasdaq 100 Index has taken back almost half the 8.7 percent it lost during this month’s flash sell-off in U.S. equities. While some were spooked by the plunge coming during the run-up to third-quarter earnings, longer-term investors should take notice that the recent pullback appears to be falling into what has been a consistent pattern for 2018.

Through the first three quarters of the year, the $66.3 billion Invesco QQQ Trust exhibited five separate drawdowns of varying degrees. The steepest and longest was a 10 percent drop over 27 calendar days, with the shortest spanning 4.1 percent over five days. A simple average of the five drawdowns yields an average peak-to-trough move of 6.7 percent over a 14 day period.

While the most recent slump started Oct. 1, when the technology ETF hit an intraday record high, investors may have already seen this sell-off’s recent bottom. Shares have rebounded 4 percent since October 11th, the 10th day into the drawdown.

Netflix will kick off third-quarter earnings for large cap technology shares later today, depending on investor’s reaction, it could help solidify the recent recovery for major tech indexes.

To contact the reporter on this story: Gregory Calderone in New York at gcalderone7@bloomberg.net

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Richard Richtmyer

©2018 Bloomberg L.P.