The price action here in the NASDAQ over the last few weeks is a good testimony as to why Technical Analysts trust in shapes and volumes as opposed to sentiment and fundamentals. There has been no encouraging data to speak of and the overall sentiment has been one of nerves and impending gloom. Regardless of this, technicians will have noted higher lows and higher highs, a decent trend support line being established and three closes above the 38.2 Fibonacci Retracement level of the move down from the end of last year.
Indicators in Play
There are different ways of using Fibonacci numbers and indeed the importance we put on each of these Retracements. In a Bear market we use the 38.2 Retracement as a bounce failure area. It is a good way of selling strength with a tight stop but we abandon this strategy and reverse once we have established ourselves back above this 38.2 Fib point on a closing basis. This is exactly what we have witnessed here.
Summary
The fact we are back above the 38.2 Fib level at 1858.50 and have taken out the last failure high at 1876.75 from the 1st of Feb Tells us that we should be looking to buy dips now. 1821.75 is where Trend Support and our Marabuzo line converge and will be a strong level.ng support.
David has been
analyzing and trading the worlds financial markets for the past 25 years. After an initial grounding with Mercury Asset Management and Warburg Securities he went on to set up his own brokerage operation in London. Since then he has appeared regularly on Bloomberg Television and been involved in providing analytics on behalf of some of the worlds major exchanges. He is also a member of the Society of Technical Analysts.
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