Market Outlook

‘Natty’ Nasdaq beckons

As we entered a new decade, the 2020s brought a drastic change to most of our lives, removing much that we had taken for granted. But even though tragic events triggered the changes we have all experienced, change can bring opportunity, and in that respect, at least current circumstances are no different to what has come in the past. 

It's safe to say that one of the biggest winners in the 'new normal' has been Big Tech, which is reflected in the Nasdaq's performance, which is looking particularly "natty" right now.

While it's difficult to ignore the fundamental drivers for its performance, as a technical trader, my primary focus will always be price action, and with the Nasdaq showing bullishness across multiple timeframes,  it is a prime candidate for further analysis.

Begining my analysis on the US NDAQ 100 monthly chart below, price has been in a long-term uptrend stretching back over a decade.  Price has just made an all-time high, and the strength of the trend is confirmed by the moving average (MA) geometry, with the faster MAs all above the slower averages. This trend is supported by bullish convergence on the MACD. And while the RSI is a little flat, it isn't diverging.

On the weekly chart, the price action is also bullish, with the MAs once again fanning. While the MACD is tailing off slightly on this timeframe, this isn't a massive concern and the price action appears strong.

Looking at the daily chart, price is in a well-defined uptrend with the MAs just starting to fan out as the 20-day MA has crossed over the 50-day MA.  The MACD is converging, and the RSI, though it has flattened, isn't raising any red flags.  As price has recently made an all-time high, it has pulled away from the MAs and is likely to return to the average sooner rather than later.

In terms of a potential trade, I will be stalking a pullback to the MA buy zone and then watching for a reversal candle to form.

Assuming that this candle closes in a bullish configuration, I will be looking for a break of the high of the reversal candle, which would be my signal to enter a long position with a stop loss placed below a swing low. 

In the event that a trade entry does trigger, in that instance, I will look to close all of my positions once a one-to-one risk to reward has been achieved.