Nasdaq Technicals Net Bullish as Breakout Readies

Things looking good for the Nasdaq as technicals return net bullish after a brief period of bearishness. This coincided with the index nestled against resistance helped by Friday's tight intraday action.  The index is nicely placed for a breakout on Monday, especially given the relative out-performance of the Nasdaq against its peers.

As with the Nasdaq, the Nasdaq 100 also sits on the verge of a breakout, but unlike the aforementioned index its technicals are not yet net bullish.

The S&P lost a little ground on Friday, but it remains within a downward channel which has the characteristics of a 'bull flag'. While all technicals are still 'net bearish', the MACD is very close to a new 'buy' signal. An upside break would also take out the 50-day MA. However, with the relative performance of the index taking a nosedive against Small Caps and Tech indices, the easier option may be to take a short trade with a stop above the 50-day MA.

The Russell 2000 is morphing from a potentially bearish ascending triangle to a bullish 'bull flag'.  Action from Thursday and Friday looks like a breakout of the 'bull flag'. Technicals have also turned net bullish with relative performance improving against the Nasdaq.  The safest risk:reward is for longs to trade using a stop on a loss of 1,340; a stop on a loss of Friday's low would have a high risk for whipsaw but is an alternative play for those seeking a tighter risk:reward.

For Monday, longs have the better opportunities with the Nasdaq, Nasdaq 100 and Russell 2000.  However, if there is a weak start or markets fade after the opening half hour, then the S&P could offer itself as a quick return short play (down to channel support).

You've now read my opinion, next read Douglas' blog.

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Dr. Declan Fallon is a blogger who trades for fun on eToro and can be copied for free.
. I invest in my pension fund as a buy-and-hold.

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