NASDAQ Forming Head and Shoulders Reversal
NASDAQ Daily
*Note: This is an update to our previous analysis that will be linked below
Price Chart
The NDX is currently trading within an upward channel (Yellow Solids), and has recently tested the bottom trend line a fourth time; the more price retests it the weaker it becomes. This has also formed what could be the neckline (Teal / Red Solid) to a head and shoulders setup and has pushed the price past the mid-point (Teal Dotted) of the double top; which would also be the head. EMA's on the other hand have failed to cross lower with the 12-day and 26-day recrossing higher. Also notable is the spike in selling pressure on July 21; which is the same area the NDX is currently trading.
Relative Strength Indicator
There is a divergence (Teal Solid) from the price which lead to the trend line (Yellow Solid) breaking and the RSI dipping below the 50 level. The RSI has since recovered, however it's re approaching the trend line for a retest.
On Balance Volume
Similarly to the RSI, the OBV has also shown a divergence from the price and moved lower past the mid-point (Teal Dotted) in the double top. After a bounce at the support (Red Solid) the indicator is moving higher to retest the mid-point.
TLDR;
The market is showing strength, but a head and shoulders pattern is possibly forming as outlined above. RSI and OBV are both signaling higher, however, the indicators are nearing a trend line retest and level of resistance respectively. If price action moves past the head then we have an invalidation, but look for lower buying volume in the beginning of September to signal the formation of the shoulder.
What Seems Legit?
Um, not our portfolio if Mr. Market keeps running away from our targets; the market has been on a tear since the reversal in Dec / Jan. I mean, how many times have you heard those Bloomberg boys on the radio be like "omg markut go zhoom moar! wuuuuut?!", then the analyst comes on and is like "OH YEA NO U GOTTA DEPLOY CASH HERE I MEAN U CANT SIT ON THE SIDELINES LIKE WE CALLED THE BOTTOM AND NAO U GOTTA BAI". Layin' it on a little thick, text book transfer of wealth. Let's see if we get that head and shoulders.
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Chart Key
Yellow Solid = Major Trend Line / Channel
Red Solid = Support / Resistance
Teal / Red Solid = H&S Neck Line
Aqua Solid = Divergences
Teal Dotted = Midpoint Resistance
White Dotted = Invalidation of H&S
Green Boxes = Supports / Target Areas
*Note: This is an update to our previous analysis that will be linked below
Price Chart
The NDX is currently trading within an upward channel (Yellow Solids), and has recently tested the bottom trend line a fourth time; the more price retests it the weaker it becomes. This has also formed what could be the neckline (Teal / Red Solid) to a head and shoulders setup and has pushed the price past the mid-point (Teal Dotted) of the double top; which would also be the head. EMA's on the other hand have failed to cross lower with the 12-day and 26-day recrossing higher. Also notable is the spike in selling pressure on July 21; which is the same area the NDX is currently trading.
Relative Strength Indicator
There is a divergence (Teal Solid) from the price which lead to the trend line (Yellow Solid) breaking and the RSI dipping below the 50 level. The RSI has since recovered, however it's re approaching the trend line for a retest.
On Balance Volume
Similarly to the RSI, the OBV has also shown a divergence from the price and moved lower past the mid-point (Teal Dotted) in the double top. After a bounce at the support (Red Solid) the indicator is moving higher to retest the mid-point.
TLDR;
The market is showing strength, but a head and shoulders pattern is possibly forming as outlined above. RSI and OBV are both signaling higher, however, the indicators are nearing a trend line retest and level of resistance respectively. If price action moves past the head then we have an invalidation, but look for lower buying volume in the beginning of September to signal the formation of the shoulder.
What Seems Legit?
Um, not our portfolio if Mr. Market keeps running away from our targets; the market has been on a tear since the reversal in Dec / Jan. I mean, how many times have you heard those Bloomberg boys on the radio be like "omg markut go zhoom moar! wuuuuut?!", then the analyst comes on and is like "OH YEA NO U GOTTA DEPLOY CASH HERE I MEAN U CANT SIT ON THE SIDELINES LIKE WE CALLED THE BOTTOM AND NAO U GOTTA BAI". Layin' it on a little thick, text book transfer of wealth. Let's see if we get that head and shoulders.
Follow us on Twitter for memes, market moves, and not so headline news.
Chart Key
Yellow Solid = Major Trend Line / Channel
Red Solid = Support / Resistance
Teal / Red Solid = H&S Neck Line
Aqua Solid = Divergences
Teal Dotted = Midpoint Resistance
White Dotted = Invalidation of H&S
Green Boxes = Supports / Target Areas
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