Kim Cramer Larsson
Technical Analyst, Saxo Bank Group
Summary: The Nasdaq 100 is pushing higher ahead of today's New York bell, but a reversal remains possible.
Where does that leave the top pattern formation?
Over the course of the days (January 17, 18 and 22), the Nasdaq 100 formed an Doji Evening-like pattern (see the blue circle on the chart below) which is considered a top and reversal pattern. The Doji candle from January 18 got within a couple of points of the 0.764 retracement of the December sell-off before being rejected. The Relative Strength Index was also rejected at the 60 threshold – i.e. there is still some bearish sentiment.
Doji Evening is a pattern you usually see after a longer uptrend; it would be an overstatement to call the bullish correction since end-December as a longer uptrend. Whether this is indeed the end of the bullish correction is still a bit too early to call. A break below 6,584 (the dashed line on the chart) would confirm the bearish reversal picture. A close above the Doji high at 6,816.25 would cancel the top reversal pattern, resulting in a resumption of the uptrend towards the 200 moving average at around 7,000.
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