I don’t spend much time following any particular market index, but noticed the Nasdaq Composite is winding tighter each day. It looks like the Nasdaq is forming a symmetrical triangle on the daily chart. That’s generally a continuation pattern in technical analysis, but you’ve got to ask yourself a question. With the monthly chart of the Nasdaq trading in a channel for the past year, what are the chances it breaks out over the top of that channel?
Well, I keep the technical analysis on my charts fairly simple, incorprating mainly moving averages, trend lines, and the occasional cyclical indicator. I really just want to be on the correct side of the stocks or index when it does break. So, is there a chance the Nasdaq heads even higher? Sure, the January effect could definitely move it up.
The big picture on the monthly Nasdaq still shows the market in an uptrend. Like any trading pattern, it will stay that way until it gets extended with seven or more candlesticks higher without a lower low. January could top it out at the upper end of that channel too.
I would guess when it does break one way, we’ll get out of this choppy trading that frustrates some online traders. Watch for a fast move when the Nasdaq Composite does break, and don’t get sucked in by a false move either.
