Today we will take a look at the technicals of the Nasdaq 100 Index.
After being down about 37% from its highs in November 2021, tech stocks allowed the Nasdaq Index to gain 10% since its latest lows back in June. Looking at the following charts, we explain why the Nasdaq is on the verge of a bull rally.
Disclaimer - Nothing in this post is financial advise
Long term bearish
Currently, the Nasdaq 100 Index is trapped in a downward-facing channel since it started to decline at the start of the year.
The latest gains in the stock market helped the Chart form an ascending triangle. As of research, ascending triangle indicates an over 60% likely hood of a bullish exit, which should excite bullish investors.
This wouldn't only be great for short-term investors, but also long-term investors could profit from this movement as the price is currently sitting directly on the upper end of the downward channel.
This means if the triangle ends up breaking out bullish, the Nasdaq could manage to break out from its long-term downtrend and finally start a new bull rally.
SMA turning bullish
While looking at the simple moving averages, we can see that the 9-day SMA formed a golden cross with the 21-day SMA on the 5th of July and is on its way to crossing the 50-day SMA line.
Usually, golden crosses are seen as a very bullish signal in the trading community.
Next major support levels
In case the ascending triangle turns out bearish, the next major support levels sit at about 11.000 and 9.700. Which was the pre-covid high back in February 2020.
Which would mean the Nasdaq has another 20% downward potential in case of a bearish continuation of the market.
Anyway, it could also be possible that the Nasdaq forms a double bottom pattern with its latest support at about 11.000.
This could also be a very likely scenario as many experts suggest the bear market to end by this year in autumn, which could perfectly align with the number of days needed to form the mentioned double bottom pattern.
Bottom Line
The next few days will decide where the market will be heading for the rest of Q3 in 2022. Investors should be very cautious when deciding if putting money in the market right now is the right decision. Or if it would be better to wait until the market chooses a direction.
In the end, a 5% difference in a stock's entry price is nothing compared to another potential 20% market crash.
Disclaimer - Nothing in this post is financial advise
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