The NASDAQ has now completed the Double Top formation, which begins on October 30 and ends on January 28. After this week’s losses, the market is directly in a major support zone where the 200-day M/A merger crosses the long-term trendline at 24.246.
This is a key line of defense. Buyers need to aggressively defend this area. If they fail, sellers – sensing weakness – will push the market towards the Double Top target of 21,550.
When we step back and look at the very long-term chart, momentum, RSI and stochastics favor a move down. However, this designated support zone suggests that buyers will initially hold the line. Historically, the first break of a major support level in conjunction with a 200-day M/A is never sold.
Stops and algos will sell at lower levels, so confirmation of a deeper move will only occur after the second breakout of this zone.
