Nasdaq 100 Index Forecast: "Shooting Star" Warns of Pullback But Uptrend Remains Intact
Nasdaq 100 index Technical Forecast: Bearish
- The Nasdaq 100 index saw a “Shooting Star” candlestick forming on the daily chart
- This may be a warning sign of a minor pullback if upward momentum is exhausted
- The overall bullish trend remains largely intact however, and the index may head towards fresh records later on
Chart by TradingView
The Nasdaq 100 index extended higher into record territory towards the weekend, but the formation of a “Shooting Star” candlestick may flag risk of a minor technical pullback. A “Shooting Star” is a bearish candlestick that usually appears at the end of an uptrend. It has a long upper shadow, small lower shadow and a small body near the low of the day.
A “Shorting Star” is inherently bearish because it suggests that prices attempted to rise significantly during the day, but then sellers took over and pushed prices back down toward the open. Therefore it hints at strong selling pressure and indicates that profit-taking activity may have ramped up after a period of gains. Read more about this pattern by visiting DailyFX’s education portal.
The overall trend remains bullish-biased however, as the index formed consecutive higher highs and higher lows over the past few months. The index breached a key resistance level at 14,000 last week, carving a path for prices to move higher towards 14,400 and then 14,950 – the 268.1% Fibonacci extension. In the event of a near-term pullback however, prices may retreat to the 24,000 area looking for support.
The index is riding an upward trend after forming a “Double Bottom” chart pattern. A “Double Bottom” is usually found at the end of a downtrend and resembles the letter “W”, as highlighted in the chart above. It serves as a popular bullish reversal signal, suggesting that the consolidation phase following a bearish “Gartley” pattern has come to an end.
The MACD indicator breached above the neutral midpoint and is trending higher, underscoring upward momentum.
--- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.