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Scottish Mortgage (SMT) Shares Are Down Over 20% Since February, Is the Selloff Over?

Simon Mugo trader
Updated 29 Mar 2021

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Shares of Scottish Mortgage Investment Trust PLC (LON: SMT) have fallen over 20% from their February all-time highs driven by the massive selloff in tech stocks that has seen its key holdings drop in value.

Most investors are wondering if the selloff is finally over so that the investment trust’s shares can start rallying again, and the chart below has some good news for traders. It appears the selloff might finally be over.

The chart below shows that SMT shares fell from over 1400p below the 1000p level before bouncing back then resuming a week downward trend, indicating that the selloff is losing steam.

After the bounce, SMT shares have not fallen with the same velocity they had initially, and it appears like they are forming a sideways trading range, which is a classic sign of a balancing zone.

It is not yet clear which direction SMT shares shall move in once the balancing zone is exhausted, but the odds favour a continuation of the uptrend in place for most of last year.

However, a rally in Scottish Mortgage Trust shares will be driven by a rally in the shares of companies held by the trust, such as Tesla, Amazon, Tencent, and Alibaba, which have recently sold off heavily.

James Anderson’s departure, the man who has managed SMT for the past 21 years, is also weighing on SMT’s shares, given that he had an impressive track record, culminating in last year’s impressive 106% return.

Tom Slater, who has co-managed the fund since 2015, will be taking over. Tom has the requisite experience to keep the fund on track and continue Anderson’s legacy.

Scottish Mortgage Trust share price.

IG chart of Scottish Mortgage Trust share price 29-03-2021

Scottish Mortgage Trust shares have pulled back heavily since mid-February, is the downtrend over?

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading