NASDAQ might have finally topped around 12400/500 levels yesterday. The indice has produced a significant evening star candlestick pattern, indicating a potential trend reversal. A drop below 11280 would confirm a top is in place and bears are back in control.
NASDAQ probable wave counts are as follows: The indice had dropped to 6629 lows in March 2020. Since then, it has rallied all through 12466 mark carving a series of higher lows and higher highs. The above rally can be sub-divided into 5 waves making it an impulse.
Ideally, an impulse rally is should be followed by a corrective drop but in this case it might not be a correction. Since the recent rally between 6629 and 12466 could be a larger degree Wave 5, NASDAQ might have terminated a larger up trend.
If the above proposed wave counts are correct, NASDAQ could be up for a bearish trend reversal and a minimum criteria could be a drop towards 6629 levels. Once it breaks below 6629, a larger degree correction might have completed its first wave.
For the above structure to fall in place, NASDAQ should first drop towards 11200 and 10800 respectively. This would also break the trend line support since March 2020. The indice might be a good candidate to be sold on rallies thereafter.
Traders might be preparing to sell after 11200 breaks. Any counter trend rally thereafter might be seen as an opportunity to go short with protective stops above 12500 levels.
Technical Analysis Team
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