Nasdaq Crosses Major Trend Line (NDX) ~ market folly

Friday, January 29, 2010

Nasdaq Crosses Major Trend Line (NDX)

The guys over at MarketClub just highlighted an interesting fact: the Nasdaq just crossed a major trend line. Check out their Nasdaq technical analysis here. One of the most basic tools in technical analysis is drawing a trend line on the chart. To do so, all you need is to connect 3 points. Then all you have to do is buy/stay long as long as the trend remains. Once it breaks, get out/go short. As they say, "the trend is your friend"... until it isn't. In this case, the Nasdaq has broken it's current trendline as evidenced by the chart below:

This trend line has been in tact for almost 11 months now. The longer the trend line is, the more important it becomes. MarketClub makes special note of this because the momentum appears to have slowed down. Using fibonacci retracements, they've outlined a downside target of 1,796 or even 1,691 which would imply quite a large correction. Head here to watch their Nasdaq video.

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