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Summary: Following a sell-off in the previous session, major U.S. stock indexes were mixed in Wednesday's trading. The tech-heavy Nasdaq index rebounded from its lowest close in nearly a month, while the DJIA and S&P 500 fell further.

Fundamentals

The Nasdaq fell from its highest level Wednesday, but still gained 55.19 points, or 0.5%, to 11,854.35. Meanwhile, the DJIA fell 228.96 points, or 0.7%, to 33,301.87, and the S&P 500 fell 15.64 points, or 0.4%, to 4055.99.

Wall Street's performance was mixed as investors weighed optimistic tech gains against new concerns about banking sector turmoil.

The rally in the Nasdaq largely reflected a positive reaction to Microsoft's earnings news, with the software giant soaring 7.2% to its best closing level in a year at the end of the day. The surge in Microsoft shares came after the company reported fiscal third-quarter results that beat expectations and provided upbeat revenue guidance for the quarter.

Google parent Alphabet also opened strongly but closed slightly lower after reporting better-than-expected first-quarter results and announcing a $70 billion share buyback.

On the other hand, shares of First Republic Bank extended the sharp decline of the previous session. Earlier, the bank reported losses of more than $100 billion in deposits for the first quarter, renewing market fears of turmoil in the banking sector.

First Republic Bank is fighting for survival as advisors try to get large banks to lend a helping hand again.

The fate of First Republic Bank seems to be sealed, as none of the banks survived the loss of more than half of their deposits; therefore, the focus of market observation will be on which medium-sized banks are vulnerable to a serious deposit run.

For now, shares of First Republic Bank remain in disarray, but the spillover effect on the rest of the market is much smaller than it was on Tuesday. The fresh sell-off in the bank's shares followed a CNBC report that the U.S. government is now unwilling to intervene on the bank's behalf. Bank advisers are working on a deal that includes trying to raise money after large banks help restore confidence in the lender, similar to their earlier attempts to deposit billions of U.S. dollars into distressed borrowers. Major U.S. stock indexes opened with modest gains, but only the Nasdaq held gains before the close.

Technical Analysis

The DJIA has been in a steady uptrend after encountering strong support in mid-March. However, the recent rally has temporarily stalled as prices have been struggling with early resistance over the past few trading days.

Although short-term oscillators reflect a slight weakening of positive momentum, near-term risks remain tilted to the upside. Specifically, the RSI is flat above its 50-neutral mark, while the MACD is softening on the upside but remains above its 0-axis.

Despite forming a death cross downward structure in the daily time frame, prices are still strongly supported by the 89-day and 100-day SMAs as well as the lower Bollinger Bands. This means that further short-term declines are not supported, and there is still a possibility for prices to rebound back to the previous high of the 34,000 range. A break of this barrier could see the bulls retest the mid-February highs at the 34,349 level.

On the other hand, if prices fall below yesterday's low of 33,240 level again, the downward momentum could slide further towards 32,765 and even 32,563 levels. If it fails to stop there, the index could fall toward the March low in the 31,426 range.

Overall, as the pressure from the First Republic Bank stock crash subsides, the market's focus will turn to next week's Fed rate decision. As the Fed rate hike is expected to be gradually digested, bargain-buying pressure may return. For the trading strategy, it's recommended to buy the dips.

Trading Recommendations

Trading Direction: Long

Entry Price: 33301

Target Price: 33420

Stop Loss: 32500

Valid Until: 2022-05-11 23:55:00

Support: 32765, 32563, 31724

Resistance: 33648, 33892, 34126