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Nasdaq Technicals Point to Lower Price Action

David Becker
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The technical picture for US stocks shows that the Nasdaq has been the leader on the way down, driven by the weakness in the bio-tech sector, which was the leader on the way up. Momentum stocks have lost their mojo, which has put the Nasdaq on its heels as it approaches technical support levels that could make or break price action during the next couple of weeks.

The Nasdaq composite sliced through support near the 50-day moving average on Wednesday and continued to move lower on the open. The next level of target resistance for the Nasdaq is an upward sloping trend line that connects the lows in October of 2013 to the lows in February of 2014 and comes in near 4120. A close below this level could lead to liquidation in the Nasdaq and a test of the February lows near 3950.

Momentum on the Nasdaq composite is negative as the MACD (moving average convergence divergence) index prints at the lowest reading the index has seen in the past 6-months. The trajectory of the index is negative which foreshadows lower prices. The relative strength index (RSI) moved lower with price action reflecting accelerating negative momentum while printing35, near 35 which is on the lower end of the neutral range and close to the oversold trigger level of 30.

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