lithium wrote:Nasdaq had major correction from 2535 to 2061, corrected 18.7% in 2 months. Fits the characteristic of typical major correction of 15~25%, 1~3mths.
On 29/6/2010, it developed a bearish Head & Shoulder pattern with volume, sentiment was extreme bearish for traders. Newspapers have been talking about Double Dip. Every trader would have sell all his longs and start shorting.
On 1/7/2010, 2 days after the Head & Shoulder confirmation, it faces fibonacci 38.2%, which can be a major support, at the same time, stochastic indicator is showing oversold 6%. It is also a previous peak 2059 on 28/8/2009. It bounced up with volume.
If an extreme bearish technical indicator like Head & Shoulder did not crash, that means the smartest money are buying. This is also a situation when all the short term traders have sold their holdings. So it's high possibility that market is bottomed.
On the weekly chart, you can see the volume of the sell down week (15/6/2010~2/7/2010) when Head & Shoulder pattern was confirmed is actually not very high, and you can see volume is reducing during the 2 month correction period.
On 20/7/2010, forms first higher low. (1st confirmation)
On 22/7/2010, it breaks 50dMA and downtrend line with volume. (2nd confirmation)
On 23/7/2010, it breaks 200dMA with volume and made a higher high (3rd confirmation)
Going forward, there might be a new bottom, if it fails to stay above the short term uptrend line in next 1 month (4th confirmation)
Comments please?
On 30/7/2010, forms another higher low. (4th confirmation)
How many confirmation do you need? So you can stop worrying and go long?
