The Nasdaq has incurred three days of straight losses as investors rotate away from technology stocks due to growing fears about the United States inflationary pressure over the coming months.
Yesterday’s higher-than-expected jobless claims form the US economy was not supportive of technology stocks. The ongoing bad weather conditions in the United States and power outages in Texas were also seen as a drag on Nasdaq, especially internet reliant tech stocks.
Popular tech stocks inside the Nasdaq have led the decline this week as investors go on the hunt for yield elsewhere on Wall Street. However, the recent and potential ongoing decline is likely to be seen as a dip-buying opportunity from more attractive levels.
Signs of a market top are still far away, as tech stocks are probably just cooling-off after posting strong first-quarter gains. Potentially, this cooling period could be welcomed ahead of the upcoming US stimulus roll-out, which puts more money in the pocket of average Americans.
The technical surrounding the Nasdaq in the short-term certainly show scope for further downside, with the index’s 50-day moving average the big technical area to watch over the coming days and weeks if the decline continues.
At the time of writing the Nasdaq is testing towards its 21-day moving average. This is typically the key benchmark technical area to watch for signs of short-term weakness. Losses under the 21-day MA could provoke a test of the 50-day MA, around the 13,100-support area.
The ActivTrader Market sentiment took shows that some 57 percent of traders are bearish towards the Nasdaq. This is not a worrying level and may indicate further steady losses in the index. It is worth paying attention to this indicator if the 21-day moving average is broken.
Nasdaq Short-Term Technical Analysis
The four-hour time frame shows that a head and shoulders pattern has formed, following the recent three-day decline in the index. Further heavy losses should be expected if the price moves under the 13,500 level.
A breakout under the 13,500 level is expected to cause the Nasdaq to decline towards the 13,100 to 13,000 areas. It is extremely likely that dip-buyers may be lurking around the mentioned downside price targets.
Source By ActivTrader.
Nasdaq Medium-Term Technical Analysis
Looking at the daily price chart the Nasdaq is trapped inside a rising wedge pattern. Typically, these patterns are considered to be powerful bearish reversal patterns. It is noteworthy that both lower and higher time frame analysis now shows bearish patterns.
Weakness under the bottom of the wedge pattern, around the 13,500 level, could cause the index to plunge towards the index’s 50-day moving average, which is located around the 13,100 level.
Source By ActivTrader.
The daily time frame also shows that cloud support from the Ichimoku indicator is located around the 12,800 level. This is likely to be the first line of support if the 13,000 level is breached.