Double top
or new bottom--a question that is likely to be on the minds of many before
Friday's open.
NASDAQ was down nearly 300 points with
less than an hour to go in the trading day on Thursday, but a late
recovery lifted the stock back to just above critical support at 4445 (a
level that provided support on 2/28, 3/16, and 3/21)-4460 (the 50%
retracement of the 1/31-3/10 rally).
The index has additional support at the
62% retracement level at 4280-4300, a level that provided support on 2/15
and 2/22, and acted as resistance on 1/24.
Although the index's ability to close
just above support was a positive, its inability to hold above its 55-day
moving average (4488) is a negative. The NASDAQ closed below the
important average for the first time since crossing above it back on
October 21st. It was a successful rebound off the 55-day M.A. on
January 31st that put a bottom in place for the index and marked the
beginning of a torrid rally to new highs.
While the index's last half-hour rally
attempt may have some follow-through, the index's chart is looking
decidedly unhealthy: the failure to hold the 55-day M.A., the double top
that is forming on the stock's chart, and the fact that the index remains
overextended over its 200-day moving average (3421) despite this week's
fall, all add up to suggest that any bounce is likely to be short-lived
and that the index still has further to fall before a bottom is put in
place.
