Is The NASDAQ In An Uptrend Or A Down Trend?

Looking back over the last 5 bars, we see that the NASDAQ has moved up on 4 days. This means that it is trending up, right? Well, yes if we are considering 5 bars. But what if we are considering the month of March? In that case, the trend is down even though recent prices have moved up.

So, should we trade long or short here?

Here are some clues. According to the TTC-A template, yesterday the NASDAQ triggered short. It did this because:

1. The 30-day moving average of price is down.
2. Williams %R moved above -20 into extreme over-bought territory.

Should the NASDAQ now fall below its 7-day moving average, a short entry would be confirmed.

But there is another side of this coin. Could we not look at the current chart and say, “It looks like the NASDAQ may be changing overall direction from down to up.” Sure, that would be a valid observation. This could certainly be an overall change in trend in the making. So let’s now ask, “When would we be convinced that the NASDAQ is now in a sustainable uptrend?” Here are some points to consider:

1. Currently the NASDAQ is right at resistance in two ways. First, it hit the round 2,000 number on March 31st and could not surpass it. Second, the NASDAQ is also at a descending line of resistance as shown by the price peaks in January, February and earlier last month (March).
2. If the NASDAQ broke up through resistance, we would turn away from opening new short positions.
3. If the 30-day moving average turns up we would be more bullish and less inclined to look for short trades.
4. If prices stay above the 30-day moving average, we would also be persuaded to be looking for trades that take advantage of further higher prices.
5. Watch the “Counting Method”. If, in the next two days, we see a close in the NASDAQ that is 1% or higher of its total on clearly higher volume, expect prices to move up further.

What then is the moral of this story?

“It is not necessary to predict the future. Wait for the market to reveal itself, and then put yourself in harmony with it.”

Why not wait a day or two or three to see which way this market will go? If it reveals itself to be inclined to go up, we’ll trade that way. If it shows a price breakdown and closes below a 7-day moving average, we’ll trade that way. Become a reed in the wind, Grasshopper, willing to bend with its pull.

By the time you read this article the NASDAQ will have likely shown us its intent. Chart today’s chart and see for yourself.

As a trader, teacher, author and lecturer Dr. Stephen Cooper has guided thousands of students to greater success in trading stocks and options. His site, www.OnlineOption.com. is an excellent resource for traders of all levels. A free newsletter is available by going to OnlineOption.com. Over the past five years Dr. Cooper has conducted live teleconference courses covering personal financial basics, stock screening, technical analysis and practical trading. He has authored The Online Option Trader, Windows to Wealth, and The Truth About Money. With over 18 years of experience Dr. Cooper is recognized for his successful techniques, his clear and systematic teaching style, and technical expertise.