Scottish Mortgage share price is trailing: Is it a buy as tech stocks rise?

A strong technology rally is underway. It started with the big tech companies like Tesla and Nvidia and is now spreading to smaller firms. As a result, the Nasdaq 100 index has jumped by over 30% this year alone. However, investors in the Scottish Mortgage Trust (LON: SMT) are still languishing. The stock has dropped by over 17% from its highest level this year and by ~29% from its 2022 high.

Some SMT constituents are booming

Some of the biggest Scottish Mortgage portfolio companies are booming. Tesla stock, the third-biggest constituent, has jumped by more than 1375 this year, making it one of the best Nasdaq 100 constituent company. It has jumped even as competition in the industry rises. Tesla has also opened its charging infrastructure to other American companies.

NVIDIA, the giant semiconductor company, has seen its stock soar by over 187% this year, helped by artificial intelligence trends. SpaceX, the space exploration company, is now raising capital at a giant $150 billion valuation. 

Amazon shares have jumped by 50% while Ferrari stock has jumped by over 47%. Other companies like Wise, Spotify, and Shopify have all soared in the past few months. 

Therefore, it is unclear why the Scottish Mortgage Investment Trust has underperformed as these technology companies soar. A likely reason is that investors have opted to allocate funds to other simple funds that track technology companies. The most popular of these funds are the Invesco QQQ and the SPDR Select Selector Fund (XLK).

Another concern, which I wrote about here, is that the fund has exposure to many unlisted technology companies that can be highly illiquid. The biggest unlisted companies in the fund are Ginko BioWorks, Zipline, Stripe, Bytedance, The Brandtech Group, Northvolt, and SpaceX. 

Investing in unlisted companies has major risks, especially in a time when IPOs are not doing well. Further, Ginkgo Bioworks has been identified as a potential scam.

Scottish Mortgage share price forecast

SMT chart by TradingView

The daily chart shows that the SMT stock price has been in a strong bearish trend in the past few months. It has formed a descending triangle pattern that is shown in black. The stock is also consolidating at the 50-day moving average while the Average True Range (ATR) has continued falling. 

ATR is an important indicator that measures volatility. Therefore, I suspect that the stock will continue falling as sellers target the next key support level at 600p. A move above the key resistance point at 700p will invalidate the bearish view.