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CANDLESTICK CHARTING


NASDAQ Fails At Resistance

03/23/06 08:49:42 AM
by Arthur Hill

NASDAQ cannot hold above 2300 and the bearish candlestick reversals are confirming resistance.

Security:   $IXIC
Position:   Hold

NASDAQ has made four forays above 2300 this year, and each one has failed to hold. The first, in early January, recorded the high for 2006, and the index has not been able to better this level yet. In early March, NASDAQ surged above 2300 and then formed a shooting star (blue oval). These are bearish candlestick reversals that require confirmation, and the index obliged with a gap down two days later (Figure 1).

FIGURE 1: NASDAQ, WEEKLY. The index is confirming resistance, with a triangle taking shape over the past few months.
Graphic provided by: MetaStock.
Graphic provided by: MS Quotecenter.
 
Despite this confirmed shooting star, the index formed a higher low in mid-March and rebounded last week. Once again, resistance just above 2300 proved its mettle, and the index formed a bearish engulfing last week (red oval). The open was above the prior close and the close was below the prior high. The bulls prevailed on the open, but the bears took control by the close.

The bearish candlestick reversals confirm resistance and a triangle has taken shape over the last few months (magenta trendlines). These are neutral patterns that show one big consolidation. Trading within this consolidation is choppy, and medium-term direction will not be established until a breakout occurs. A move above the March high would be bullish and a move below the March low would be bearish. If the relative performance of NASDAQ versus the NYSE Composite is any indication, the index will fail at resistance and break support.



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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