The Scottish Mortgage Investment Trust PLC (LON: SMT) share price has fallen 12.9% over the past month as the growth stocks the company invests in pulled back. The question looming on most SMT shareholders’ minds is, will the pullback ever end? And if so, when can we expect the downtrend to reverse?
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There is no easy answer to these questions, but we can look at a few factors that could help us predict if and when we could see SMT shares reverse course and start rising. Firstly, looking at the SMT share price below, we can see that the shares are approaching a long-term support level, which could interrupt the downtrend.
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I expect SMT shares to hit the support level in the next few days, at which point investors should closely monitor the shares to see if a reverse pattern will emerge. There is a reason most short-term traders use technical analysis when trading the markets; it works most of the time.
Using technical analysis, we can see a support zone between 684p and 673p. Most traders expect prices to pause at critical levels before making their next move, and we can expect the same with SMT shares. However, there are no guarantees that we will see a rebound for the zone.
We could easily see the SMT share price break through the support level if the number of sellers exceeds that of buyers. Turning our attention to the fund’s fundamentals, we can see that the recent decline in SMR shares was driven by a pullback in the prices of the growth stocks the fund holds.
Therefore, it stands to reason that we could see SMT shares rally higher if the stock prices of companies such as Moderna, Tesla and Shopify, which the fund holds, reverse course and head higher. However, the Fed’s hawkish stance on monetary policies could hinder any potential rally from growth stocks.
The Fed is expected to hike interest rates at its March meeting by 50 bps, followed by another two rate hikes, which could trigger more losses in SMT’s growth stocks. Hence, we could easily see SMT shares break below the support zone and head lower if the above happens.
*This is not investment advice.
Scottish Mortgage (SMT) share price.
The Scottish Mortgage (SMT) share price is down 12.91% in the past month. What’s next?
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