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POINT & FIGURE


Nasdaq 100 Breaks Triangle Trendline

06/08/04 10:09:26 AM
by Arthur Hill

On the 30-minute point & figure chart, the Nasdaq 100 (NDX) formed a triangle over the last few months and has broken above trendline resistance.

Security:   NDX
Position:   Accumulate

Even though it is an intraday chart, the 30-minute point & figure chart offers a long-term perspective on the Nasdaq 100. The index bottomed in October 2002 at 795, rallied to 1155 by December 2002, corrected to 938 by March 2003, rallied to 1560 by January 2004 and most recently corrected to 1368 in March 2004.

Graphic provided by: MetaStock.
 
The long-term trend is clearly up as the index holds well above the October 2002 trendline. Since peaking at 1560, the index consolidated over the last few months with a triangle consolidation (1560 to 1368). The recent trendline breakout is quite positive and further strength above the April high (1508) would argue for a continuation of the current uptrend (the one that began in October 2002).

There are two methods to project an upside target. First, the width of the formation (1560 - 1368 = 192) can be added to the breakout at 1472 (1472 + 192 = 1664) for a target around 1664. The second method extends a trendline parallel to the lower triangle trendline. This black trendline extends up from 1560 and projects further strength to around 1580. The green box shows the range of both targets and can act as a "target zone." A failure around 1500 and move below key support at 1370 would be bearish.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
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