Tech rally running into an inflation buzzsaw — hedge with a short on the Nasdaq
Thesis
Tech stocks have enjoyed a recent rebound, but they are incredibly vulnerable to higher interest rates. With BlackRock warning about inflation and CPI expected to show prices rising above 4%, the Fed's hands will be tied—they will have to keep rates high or even raise them. Higher rates make borrowing expensive, which hurts fast-growing tech companies the most. A hot inflation number tomorrow morning could easily kill the recent market rally, making a short position on the Nasdaq a smart hedge.
Strategy approach
Build a defensive short strategy for QQQ (Nasdaq ETF) on the Daily timeframe. Enter short if the market opens lower than the previous day's low (gap down) following a hot CPI report, or if the price breaks below the lower Bollinger Band (20, 2). Set a profit target at the 50-day Simple Moving Average, and a strict 3% stop loss.