The Nasdaq's Technical Outlook
The Nasdaq Composite Index opened yesterday session gaping down dragged by poor performance of many of its main components, including (NASDAQ: AAPL), (NASDAQ: QCOMM) and (NASDAQ: NFLX). From a technical point of view, gaping up or down is a strong continuation pattern.
In the case of Nasdaq, the Fibonacci fan that was working as support level during the last sessions got broken giving a clear indication that the movement is strong and a possible level of 2900 may be achieved during the next sessions. Apart from the Fibonacci indicator and the gap pattern, three main Moving Averages (10, 20, 40 and 50) are converging down as we speak and RSI is already below the 50 mark, a further signal that the Index losing upper power.
In a positive note at least for the short term, yesterday candlestick Doji formation can be interpreted as a change in direction - and again this normally works only in the short term. This may provide an opportunity to enter a long position having in mind that it may not last and most likely will not change the direction of the trend.
For the future, the Nasdaq Index may be expected to move up to levels of 3000 (giving the Doji formation) where it may bounce back down to the 2900 level. If the Index is capable of changing gears and continue trending up, then the level to observe would be the correspondent to the Fibonacci fan - Around 3500. After breaking that level we may expect the Index to retake the winning stake it shown during the first quarter of 2012.
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