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October 14, 2005
NDX from the TD Trader Daily Swing
Led by a rebound in the Semiconductor HOLDRS (SMH), the Nasdaq 100 formed a bullish engulfing just above 1500. This bullish candlestick reversal requires confirmation and a close above 1550 would do the trick. A bullish engulfing marked the 29-Aug low (gray oval) and this was confirmed two days later with long white candlestick.
For what an unconfirmed bullish engulfing looks like, see the 22-Sep bullish engulfing in the Retail HOLDRS (RTH). A long white candlestick failed to follow and this pattern is still unconfirmed. There were attempts to rally, but RTH failed to close strong and above resistance at 94 in late September. Two hammers formed recently and 94 still holds the key.
On the 60 minute chart, the decline slowed around 1520 and the index bounced with an afternoon rally. After a 100 point decline without a bounce, the index is ripe for a retracement or a move back to broken support. A 50% retracement would extend to around 1570 and I see a broken support zone around 1550-1565. Together, these form a resistance zone around 1550-1570 and I would expect a rally to fail in this area.
In the TD Trader Daily Swing commentary (click here), I have been short-term bearish since 5-Oct (1589 NDX)
Posted by Arthur B. Hill at October 14, 2005 04:36 AM