Is the Nasdaq preparing to correct?

Kim Cramer Larsson

Technical Analyst, Saxo Bank

Summary:  The Nasdaq 100 seems to be pausing around 7,000. Is a correction near?


The strong rebound we have seen in US stocks since their late-December lows, and particularly since Fed chair Powell's dovish January 4 speech, could be ripe for a correction. 

The Nasdaq 100 index seems to be taking a breather around the 7,000 level, and is testing the 200-day simple moving average. It has formed what looks like a rising wedge pattern and possibly a double top. A close below 6,836 will confirm the double top with a target around 6,600. That would also be a bearish breakout of the wedge. 

The Relative Strength Index is bullish with no divergence, indicating we could see another push higher in an effort to test resistance at 7,107. A close above that area could fuel a rally, forcing bears to close short positions.
Nasdaq 100
Source: Saxo Bank
You can follow the development of the pattern, and possibly the breakout, in the Trade Signals section on SaxoTraderGO represented by the CFD on the Nasdaq 100 future

When and if a breakout is confirmed, a possible price target and stop will be calculated updating the below details and trade ticket.
SaxoTraderGO
Source: Saxo Bank

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