The NASDAQ Composite was down a substantial 4.4% in Wednesday’s session. It’s been headed lower since the beginning of the month, and is down 12% total in that time.
There have been two similar percentage downdrafts this year.
The NASDAQ dropped about 11% from peak to trough in February and about the same percentage in early April. After the February pullback a large hammer candle formed just above an uptrend line (dashed red) drawn off several important 2017 lows. Then in April a morningstar pattern formed above the same uptrend line. The morningstar is a three period bullish reversal pattern (explained in detail here). The reversals also occured just above the 200 day moving average.
Currently, the NASDAQ is below both its 200 day moving average and the long term uptrend line. Those support levels are gone and there is little in the way of technical support in the nearby area. So what should we key on now.
The only option left is to be particularly alert to the daily price action. If the past repeats the drop in the NASDAQ based on the previous percentage declines, may be just about over. Now we have to monitor the chart for one day bullish reversal candles or multiple day reversal formations. We will.