Sunday, February 11, 2007

NASDAQ Technical Picture - Weekly Update

Comparing the daily vs. weekly timeframe of the NASDAQ, we get two contrasting technical pictures. The daily timeframe shows that the market is showing definite signs of weakness in its third month of a phase III consolidation vs. the weekly which shows that price is still holding above the rising 10 period EMA with a bullish, rising ADX line.

Friday's action carved out a WR bearish engulfing bar on higher volume (distribution) while simultaneously notching a lower high which is generally an early signal of a potential reversal.
Furthermore, we closed below both the 10 and 20 MAs and we see a bearish -DI crossover taking shape on the ADX oscillator.

Narrowing the focus to the 60 minute timeframe, we can see that price is sitting just above pivot point support as well as the 200 period MA, so we can expect an attempt to rally back up to 2475-2480 resistance in the very short-term.

Overall the McClellan overbought/oversold oscillator is neutral, however, it is more important to note that the bandwidth during our phase III consolidation has contracted significantly and appears be setting up for expansion.

5 comments:

Anonymous said...

Hi Jamie,
How do you define distribution day? And what is its significance?

Can you recommend 2 books on technical analysis which helped you to achieve this level of proficiency today? Thx!

Pat

Jamie said...

Hi Pat,

A distribution day occurs when price closes below the previous day's low on higher volume. An accumulation day is the opposite.

The significance in the current market is to help determine if the this current consolidation phase will resolve itself as a continuation or reversal pattern. Friday's price/volume action on the NASDAQ signifies that smart money is selling. However, we need to see more distribution days in the coming days and weeks to confirm that the market is indeed reversing.

I have read upwards 25 books and it's difficult to identify the two best books without knowing your trading/investing objectives.

All of the books on my left side panel are highly recommended. If you are relatively new to trading, I would recommend Martin Pring's Technician's Guide to Day and Swing Trading because it covers most of the technical aspects of trading as well as practical knowledge applicable to day trading. In addition, it comes with CD ROM. Secondly, I would recommend the Japanese candlestick book as it is important to master the key candlestick reversal patterns. If you already understand candlesticks, you should buy the Techniques of Tape Reading which is another very practical guide to intraday chart setups, entries and exits.

The Carter Book is for intermediate traders (at least three years experience).

Hope this is helpful.

Anonymous said...

Thanks Jamie.

I'm looking at improving my day-trading and swing trading. I'm not a newbie, I have some trading experience, just wanted to brush up my skills. I'm amazed at your level of trading proficiency, so curious to know which book(s) you attribute your current level of skill to. I've read Carter's book, its good and easy to understand. Thanks

Pat

Jamie said...

Hi Pat,

Okay, now I understand what you are looking for. So in that case, I would recommend the last book on the side panel which is my technical bible -Technical Analysis of Stock Trends by Edwards and Magee and my second choice would be Technical Analysis of the Financial Markets by John Murphy.

Anonymous said...

Thanks Jamie,

Pat