Nasdaq 100 could be headed for a ‘pause,’ so here are the companies that could benefit

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Amid "extreme enthusiasm" for high-flying technology stocks in the Nasdaq 100, investors might want to look to the forgotten members of the index for income, according to MKM Partners. 

The Nasdaq 100, made up of the biggest nonfinancial members of the Nasdaq Composite, has rallied more than 25% this year as investors piled into technology stocks to lead them out of the depths of the coronavirus market rout. Names that make up the index like Amazon and Tesla have soared this year, up 73% and 292%, respectively. 

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Nasdaq 100 in 2020

"We still like the Nasdaq, but feel the larger more influential names are in need of a pause," MKM Partners chief market technician JC O'Hara said in a note to clients. 

MKM said it has concerns about the correlation between the Nasdaq 100 and the Nasdaq 100 Volatility index. Historically, when these two indicators fire in unison a pullback is near, the firm said. MKM told clients it's time to take profits in the index's winners like Tesla, Apple, Netflix and Microsoft. Instead, it said to find the less popular names to bet on. 

"As breadth expands, we can rotate out of the largest Nasdaq 100 names and look for opportunity in the lower half of the index," O'Hara added. 

Here is a look at the list of stocks in the Nasdaq 100 that MKM Partners said are a good idea to rotate into. 

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