Tuesday, February 01, 2011

Daily Market Commentary: Bear Trap in Nasdaq 100

While the S&P grabbed the headlines with its new closing high (undoing all the selling of Friday) it wasn't the index to make the biggest move.

($SPX)

via StockCharts.com

That honor went to the Nasdaq 100 as it completed a bear trap. Shorts - if they haven't covered already - will have to step up to the plate to protect themselves. If this forced buying pushes the Nasdaq 100 over 2,337 it will kick start the next round of bullish momentum. Placing stops is easy, use the bear trap low as a marker.

($NDX)

via StockCharts.com

Small Caps were not to be left out. Its +2% gain returned it above its 20-day MA, but kept it shy of regaining the former channel.

($RUT)

via StockCharts.com

As a final mention, the semiconductor index continues to honor its narrow channel. It is nicely poised to challenge resistance.

($SOX)

via StockCharts.com

So, will bears have mojo to mount another attack? While small losses would not be unexpected, it will be important for bulls to hold on to the upper range of today's buying. With Large Caps (and semiconductors) trading inside a channel it will be easier for them to continue higher. The Nasdaq 100 has an interesting bear trap to work with and this might be the index to trade long over the coming days.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 best trading strategies for the US, UK, Europe and Rest-of-the-World in the Zignals Trading Strategy Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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