Nasdaq to sink before big rally?
Hi Guys,
Firstly this post has a lot of details and a messy chart to go with it but for those who care to read to the end you might find some of the information useful.
The Nasdaq/ US 100 has stalled in bullish momentum in the last few sessions of trading with sellers looking like they are in control at the moment. The larger time frame bias is sill bullish in my opinion and the current price action, digesting the sharp v snapback from the bottom and consolidating for a while is what is needed in order for a strong sustained move up in price.
The Nvidia earnings report didn't play out as some were hoping/suggesting that we will get a massive move up from the current levels.
The points of interest on the chart and the harmonics are purely speculative at this point and a possible, and possibly unlikely scenario for price movement in the following weeks/ months. If the price action does move in the way I have mapped on the chart then I will look like a genius and if it doesn't then I will look like an idiot, either way I've had experience on both sides of that coin.
Now that that is out of the way I'll get to explaining the detail on the chart.
The MA's are daily MA's , Green line = 20 MA, Orange Line = 50 MA and purple line = 200MA. The red line is the AVWAP from the April low ,the pink line is the AVWAP from the recent bottom/ daily low, the blue line is the Year to date AVWAP and the black line is the all important AVWAP from the October low from where this bull rally began. The recent low made a dip through this AVWAP and once reclaimed bounced off it and ripped higher. This AVWAP will be all important level of support that must hold along with the 200MA to keep hopes of further move up in price. I think losing these two supports will see deep correction for the Nasdaq.
Currently price is forming a butterfly harmonic with entry point around the 38.2 fib level of the retrace of the daily low to the current high ( yellow box) The first highlighted box is that zone which also has the red and pink AVWAP and the 20 DMA that may provide enough support for a relief bounce.
The blue box is the golden zone retracement area which has the black AVWAP and the high point made from the higher low at the bottom that we may get enough support to get a bounce.
The purple box is the 0.786 to 0.886 retrace area which has the black line, the 200DMA and the higher low made at the bottom where we will find out wether support is still there for bullish continuation or we rollover and confirm the end of this bull market.
The retracement we had from the low back up to the recent high is around the 78.6 retrace from marking from all time hi to lo and that immediately rules out all harmonic possible patterns except the butterfly. ( The recent selloff was also entry point for a massive butterfly pattern which started to develop from the bear market high and landed precisely at the recent all time high, so the Nasdaq seems to like building and respecting the butterfly pattern or from a fib perspective the 1.618 retracement levels from highs to lows) I'm hoping we retrace back enough from the current price to make a test of that daily low area and if that should happen that will add further formation to the larger butterfly pattern on the chart which starts at the all time high runs down to the daily low retraces to our recent high and if we travel to the daily low area makes an excellent C point ( B to C being 0.886 or close to). If we hold support and thus mark a double bottom of sorts and rally from there then the harmonic suggests that we would have bearish entry points at the D point of 1.27 or 1.618 which are the red and blue lines respectively at the top of the chart. These are also obviously 1.27 and 1.618 retracements of the recent all time high to the daily low, both nice areas to look for sell opportunities when we are in price discovery.
The blue line where the 1.618 D leg of the potential butterfly pattern has entry is close to the black line at the very top of the chart which may be another area where we see a big sellof/ strong resistance. The black line is the 2.0 retracement of the bear market hi to low. We had a nice correction from the 1.618 retracement of bear market hi to low so this next important fib level of that base will likely produce similar results and will be an important level to mark and keep an eye on should price reach that point.
As I said earlier none of these scenarios may end up happening, starting from the very beginning and price may take a totally different path from here but the zones that I have highlighted could play an important part in trading action regardless of how price travels to get to these points.
Thanks for taking the time to read this post if you got to the end.
Safe trading all
Firstly this post has a lot of details and a messy chart to go with it but for those who care to read to the end you might find some of the information useful.
The Nasdaq/ US 100 has stalled in bullish momentum in the last few sessions of trading with sellers looking like they are in control at the moment. The larger time frame bias is sill bullish in my opinion and the current price action, digesting the sharp v snapback from the bottom and consolidating for a while is what is needed in order for a strong sustained move up in price.
The Nvidia earnings report didn't play out as some were hoping/suggesting that we will get a massive move up from the current levels.
The points of interest on the chart and the harmonics are purely speculative at this point and a possible, and possibly unlikely scenario for price movement in the following weeks/ months. If the price action does move in the way I have mapped on the chart then I will look like a genius and if it doesn't then I will look like an idiot, either way I've had experience on both sides of that coin.
Now that that is out of the way I'll get to explaining the detail on the chart.
The MA's are daily MA's , Green line = 20 MA, Orange Line = 50 MA and purple line = 200MA. The red line is the AVWAP from the April low ,the pink line is the AVWAP from the recent bottom/ daily low, the blue line is the Year to date AVWAP and the black line is the all important AVWAP from the October low from where this bull rally began. The recent low made a dip through this AVWAP and once reclaimed bounced off it and ripped higher. This AVWAP will be all important level of support that must hold along with the 200MA to keep hopes of further move up in price. I think losing these two supports will see deep correction for the Nasdaq.
Currently price is forming a butterfly harmonic with entry point around the 38.2 fib level of the retrace of the daily low to the current high ( yellow box) The first highlighted box is that zone which also has the red and pink AVWAP and the 20 DMA that may provide enough support for a relief bounce.
The blue box is the golden zone retracement area which has the black AVWAP and the high point made from the higher low at the bottom that we may get enough support to get a bounce.
The purple box is the 0.786 to 0.886 retrace area which has the black line, the 200DMA and the higher low made at the bottom where we will find out wether support is still there for bullish continuation or we rollover and confirm the end of this bull market.
The retracement we had from the low back up to the recent high is around the 78.6 retrace from marking from all time hi to lo and that immediately rules out all harmonic possible patterns except the butterfly. ( The recent selloff was also entry point for a massive butterfly pattern which started to develop from the bear market high and landed precisely at the recent all time high, so the Nasdaq seems to like building and respecting the butterfly pattern or from a fib perspective the 1.618 retracement levels from highs to lows) I'm hoping we retrace back enough from the current price to make a test of that daily low area and if that should happen that will add further formation to the larger butterfly pattern on the chart which starts at the all time high runs down to the daily low retraces to our recent high and if we travel to the daily low area makes an excellent C point ( B to C being 0.886 or close to). If we hold support and thus mark a double bottom of sorts and rally from there then the harmonic suggests that we would have bearish entry points at the D point of 1.27 or 1.618 which are the red and blue lines respectively at the top of the chart. These are also obviously 1.27 and 1.618 retracements of the recent all time high to the daily low, both nice areas to look for sell opportunities when we are in price discovery.
The blue line where the 1.618 D leg of the potential butterfly pattern has entry is close to the black line at the very top of the chart which may be another area where we see a big sellof/ strong resistance. The black line is the 2.0 retracement of the bear market hi to low. We had a nice correction from the 1.618 retracement of bear market hi to low so this next important fib level of that base will likely produce similar results and will be an important level to mark and keep an eye on should price reach that point.
As I said earlier none of these scenarios may end up happening, starting from the very beginning and price may take a totally different path from here but the zones that I have highlighted could play an important part in trading action regardless of how price travels to get to these points.
Thanks for taking the time to read this post if you got to the end.
Safe trading all
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