Technical analysis: Expect short-term Nasdaq falls

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The Nasdaq 100 index in the US has been falling for a number of weeks and has dragged the Standard & Poor’s 500 and Dow Jones industrial average down with it. Its chart shows where one should expect price support on its current decline.

Nasdaq 100 index: Lower target.

Recommendation: Traders sell short rallies.

Trend: Short term down. Medium term sideways. Long term up.

(Weekly)

- Technology tends to lead in the US, and the Nasdaq 100 has broken down below line 2 support (which forms a rising channel with line 3).

- The minimum target from this channel is 3 320, measured as the height of the channel projected down. (At the time of writing this index was at 3 446). One should expect more short-term decline here.

- This target coincides with (or is slightly below) line 1 support.

- The weekly stochastic (on top) is entering its oversold region but can decline a bit before becoming fully oversold (confirming the lower price target).

- For now, traders should be shorting on minor bounces until the downside target is reached.

- This index will provide a good buying opportunity, but not just yet.

* Colin Abrams is an independent technical analyst. To subscribe to more of his recommendations or to attend his courses, please go to www.themarket.co.za.


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