Nasdaq100 – Do we have achieved the top?
There are many ways to analyze a value. The simplest way based on the sex tenets of Charles Dow. One of these tenets means that every market displays three movements called the “main movement”, the “medium swing” and the “short swing”. Furthermore said Dow that in every value or market exists three phases called “accumulation phase”, “public participation” and “distribution phase”.
The “accumulation phase” is a period when investors “in the know” are actively buying (or selling) stocks against the general opinion of the market. With this information we want to analyze the Nasdaq100 in the timeframe of one hour.
Main movement:
The main trend shows us an intact uptrend with a correction zone between 4543 points and 4426 points on the lower side (green rectangle). After the price has created a new top at 4584 points it came back into the green zone. As Dow said a trend continuation is more likely than a trend break so we can expect that the price is stabilized in the green zone and started the next movement from there. If we get a close below the green zone, the trend is unfortunately broken and our chance is off.
Medium swing:
The current correction which we can see in the main movement indicates in the medium swing by a downtrend. The price is here in the movement – this term means that the price is in this case below the last point two at 4506 points – and the current correction zone runs between 4506 points and 4556 points on the upper side. A trading chance offers to us when the price is running back into the red zone and is turned back there. But we have to be careful because this trend size is running against the main movement. Charles Dow argued that it is better if all trends are facing in the same direction.
Short swing:
In the smallest trend size we have an especially situation because it indicates the same picture as in the medium swing. Appropriate the same words as above mentioned supplies here.
My personal conclusion:
We have to decide in which trend size we want to make a trade. We have two options. The first one is a long trade in the main movement, as long as the price remains in the green zone. With a stop below the mentioned zone we can speculate on a trend continuation.
The second one is a short trade in the short swing trend size, but only if the price is coming back into the red zone. Why should we take the short swing and not the medium swing? The answer is really simple. If you remember Dow said the trends have to run in the same direction. The medium swing doesn´t do that because it´s upper trend runs against. Therefore the short swing is the right one because its upper trend – the medium swing – is running in the same direction.
I hope you will remain favorably disposed towards me and always remember: the journey is the reward!
kind regards
Markus Gabel
