Will the Nasdaq Break the 2000 Level?
Posted on 08. Feb, 2010 by trader21 in *TODAY'S STOCK SETUPS
NASDAQ-Will it break the 2000 level?
We are currently at #8 in the scenario below.
After the late day reversal on Friday we had some hope of a nice move higher in the Nasdaq and other indices. Mondays nice stock setups worked for the first couple of hours before fizzling out after the sellers once again took control. The selloff wasn’t as ugly as last Thursday’s action but to selloff again so soon really explains how weak this market really is right now. A normal bounce would have taken us back to the 50 day or at least the 100 day Moving Averages but so far we haven’t come even close to those levels.
After such a long and steep rally (March-January) without any corrections there is no doubt things could once again turn ugly. Here is how it plays out
#1 We get profit taking ahead of earnings
#2 We get profit taking and selling on both good and bad earnings announcements
#3 The big buyers get spooked and pull their bids.
#4 A downtrend is established
#5 The specialists and traders both go with the flow (Trend) and add additional selling and strength to the downtrend at old support and levels. These old levels now turn into resistance levels.
#6 This action causes further fear and profit taking
#7 Buyers once again fail to show up at old support zones
#8 Stocks begin to gap down and volatility spikes.
#9 This leads to panic selling and a big heavy volume flush out breaking through the 200 day MA and 2000 level on the NASDAQ
#10??
Will this lead to a continued downtrend?
Will the first break be met with institutional support to hold those levels?
Will many of the weaker names be left for dead once again to settle back down at the fall 2008 levels?
What we see happening at this point is only the true good stock pickers surviving. We see the quality stocks surviving this slaughter and those portfolio managers with poor stock chart reading skills being taken out of the market permanently.
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Thanks
Better Stock Entries
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