Breaking News
0

Chart Of The Day: NASDAQ Signaling China-U.S. Trade Talks Won't Succeed?

By Investing.com (Pinchas Cohen/Investing.com)Stock MarketsJan 09, 2019 17:01
za.investing.com/analysis/chart-of-the-day-nasdaq-signaling-chinaus-trade-talks-wont-succeed-200198028
Chart Of The Day: NASDAQ Signaling China-U.S. Trade Talks Won't Succeed?
By Investing.com (Pinchas Cohen/Investing.com)   |  Jan 09, 2019 17:01
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Stocks have been rallying on hopes that the world’s two largest economies, the US and China, might finally put to rest their trade differences. Talks between the economic superpowers were extended for a third day, today, on reports their differences have narrowed.

A resolution to the lingering trade dispute would help mega caps since these multinational companies rely on exports to boost revenue, which would decrease on the burden of rising tariffs. At first glance, this narrative could explain why the NASDAQ Composite gained 1.08% yesterday.

So why then has the small cap Russell 2000, an anti-trade proxy, outperformed during this current rally? If tariffs are set to ease on a resolution to the trade spat, small caps should fall as the smart money moves back into large caps.

Though oil price volatility and Fedspeak have had an impact on energy and financial shares respectively, it's been technology stocks that have been leading the broader market higher—and lower. They're particularly sensitive to positive trade developments, often suffering significant selloffs on trade setbacks.

Why then wouldn't the tech-heavy NASDAQ be the current rally leader? Perhaps informed money knows something the rest of us don't?

Could it be they aren't buying into the possibility of an actual deal? The NASDAQ Composite's technicals certainly signal that could be the case. Tech shares are about to lead the market lower yet again.

COMPQ Daily
COMPQ Daily

Yesterday, trading on the NASDAQ Composite formed a Northern Doji, which is also a Hanging Man. Both variations—combined in one candle, in this instance—follow a rally. The Northern rally suggests the market is overbought, as bulls run out of steam.

While in itself that doesn't necessarily mean an immediate price reversal, it suggests that, as the Japanese say, the market is tired. It indicates that the rally is vulnerable and that other factors may weigh on the rally, slowing or even ending it.

When additional technical signals emit alerts, especially at important market junctures, the bearish implication of a Northern Doji is amplified. In this case there are six things to be aware of:

  1. A Northern Doji presumes an overbought market and stochastics are indeed overbought.
  2. Additional indicators supporting a reversal: the Northern Doji in the form of a Hanging Man, a candle as ominous as it sounds, when confirmed with a lower close in the following session, leaving the bulls “hanging.”
  3. The RSI is making its fourth attempt to overcome its resistance line, previously its support line, as momentum flipped, along with the creation of a descending channel, following an ascending channel.
  4. The 100 DMA just crossed below the 200 DMA, showing prices slowing down—though the 50 DMA recently crossed above the 200 DMA, triggering a Golden Cross, suggesting prices should go higher. We have been seeing such market dichotomies, which project the precarious position of a market on the edge of a knife, one that could still resume its bullish trajectory. However, should it fall just a little, the bear will eat the bull's lunch.
  5. The doji developed at the October-December, support-turned-resistance line as the supply-demand balance shifted, and
  6. As the price nears the top of the descending channel since October

Whether because of trade talks not succeeding or another as yet unknown reason, the NASDAQ Composite is showing broad and deep weakness.

Trading Strategies – Short Position Setup

Conservative traders would only bite if the upward correction is full, reaching the channel top, followed by at least one long, red candle engulfing a green or small candle of either color. Then, they’d wait for a pullback, for an entry closer to the resistance and their stop-loss, to reduce exposure and increase risk-reward ratio.

Trade Sample

  • Entry: 7000
  • Stop-loss: 7020
  • Risk: 20 points
  • Target: 6800
  • Reward: 200 points
  • Risk-Reward Ratio: 1:10

Moderate traders might risk a short without waiting for the price to retest the channel top, if the price closes lower later today. Then, they may wait for a retest of yesterday’s high, for a better entry.

Trade Sample

  • Entry: 6900
  • Stop-loss 6910
  • Risk: 10 points
  • Target: 6800
  • Reward: 10 points
  • Risk-Reward Ratio: 1:10

Aggressive traders may enter a short immediately.

Trade Sample

  • Entry: 6900
  • Stop-loss: 6910
  • Risk: 10 points
  • Target: 6800
  • Reward: 10 points
  • Risk-Reward Ratio: 1:10

Original post

Chart Of The Day: NASDAQ Signaling China-U.S. Trade Talks Won't Succeed?
 
Chart Of The Day: NASDAQ Signaling China-U.S. Trade Talks Won't Succeed?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email