Big Tech stocks look 'exhausted,' analyst warns. But these 100 'next-gen' Nasdaq names appear poised to take off.

By Joseph Adinolfi

The list of next-generation names includes sports-betting platform DraftKings

After rising during 12 of the past 13 weeks - something that hasn't happened since 1985 - the S&P 500 is starting to look tapped out, according to one prominent Wall Street analyst.

"Clearly upside momentum is strong, but it is starting to show some exhaustion signals here," said Jonathan Krinsky, chief market technician at BTIG, in a note to clients shared with MarketWatch over the weekend.

But while the main indexes might be overdue for a period of consolidation, especially as 38% of S&P 500 companies prepare to report earnings this week, Krinsky said he sees opportunity elsewhere - namely, in the Nasdaq Next Gen 100 index, which includes the next 100 largest companies trading on the Nasdaq following the 100 companies that make up the Nasdaq-100. This index of Nasdaq also-rans appears poised for a breakout, Krinsky said, after forming a large base over the past two years.

Since the start of 2024, strong gains from a handful of megacap technology stocks have helped push the S&P 500 SPX and Nasdaq-100 NDX into record territory.

Already, the Nasdaq-100 - including most of the group of megacap technology stocks known as the Magnificent Seven - is looking exhausted, just as many of the names in the index prepare to report earnings for the final three months of 2023 this week.

"Given the run into the prints that many names have had, the bar is quite high to keep things going," Krinsky said in a note to clients shared with MarketWatch over the weekend. "When we look beyond the top 100 NDX names, however, the Nasdaq Next Gen 100 Index isn't exhausted. It has tested the 1100 level five times over the last two years forming a large base. Another test is likely to see a breakout, in our view."

See: The busiest and most crucial week for fourth-quarter earnings is here. These 5 companies will do the heavy lifting.

Krinsky named four companies from the next-gen Nasdaq list that look particularly promising based on recent trading activity. The list includes sports-betting company DraftKings Inc. (DKNG), cloud-security company F5 Inc. (FFIV), medical-technology company Hologic Inc. (HOLX) and pharmaceutical company Repligen Corp. (RGEN).

The Invesco Nasdaq Next Gen 100 exchange-traded fund QQQJ has shed 1.2% since the start of the year. It kicked off the week little changed on Monday, down marginally to trade at $26.67 a share.

-Joseph Adinolfi

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01-29-24 0955ET

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