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The Nasdaq Composite’s failure to break through and pull away from key resistance leaves the technology-laden US index in a perilous position.
January’s surge to 4,247 took the Nasdaq close to the late 2000 minor peaks of 4,260 and 4,289 but the benchmark proved unable to thoroughly test these levels, posted as the index began to retreat from its March 2000 all-time high of 5,133.
This is a bad sign, while the appearance of a bear flag in early February and a break below a long-term trend support line look even worse. The flag pattern suggests a near-term target of 3,870, just below the 23.8% retracement of the rise from November 2012’s low of 2,811 and within touching distance of November’s 3,855 trough.
Should the Nasdaq sink below this mark, chartists would look toward previous support around 3,570, which lies near both the 50% retracement of the advance from late 2012’s nadir and also the 23.6% retracement of the huge gains made since the index hit bottom at 1,266 in 2009. The 38.2% retracement of the 2009-to-2014 bull run sits at 3,108 and a very rapid decline toward this could even pressure the rising base support line of a longstanding broad bull channel.
Only a surge back above 4,140 would thwart the bears.
CHART ANNOTATIONS
1. January peak fails to test critical resistance
2. Bear flag develops
3. Price weakness breaches trend line support
Nasdaq Composite SELL 4,012
TARGET 3,543
STOP LOSS 4,150
