Dark Cloud Cover in the Nasdaq 100

Tuesday, May 1, 201

A note to Tech Investor Readers - this post is coming to you late, as life dictated that I step away from the blogs this week. When life speaks, I tend to listen. 

By Scott Pluschau
http://scottpluschau.blogspot.com

Last weekend's review in the Nasdaq 100 covered the COT report and can be found here:  http://scottpluschau.blogspot.com/2012/04/weekend-update-nasdaq-100_29.html

(The April 30th) daily candlestick is known in Japanese Candlestick analysis as a Bearish "Dark Cloud Cover".  See right hand side chart below.  A dark cloud cover is a potential reversal pattern when a market gaps up at the open and closes below the halfway point of the previous candle.  This price action makes the bulls think twice about their prospects for a continuing trend.  Keep in mind I believe Japanese Candlestick analysis is useless without confirmation.  I point it out because I want to be early in recognizing a potential change in trend.  Being early in recognition prepares a game plan.  Reacting early ruins one.

What makes this more interesting than normal is the fact that it took place at the highs of this rally and closed beneath a prior major multipoint resistance trendline.  Volume was weak than the prior day which was weak enough as it was.  Nonetheless this is a classic setup.

(Click on chart to expand)

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