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Today’s Trading Edge: Nasdaq’s Drop May Scare Perma Bulls

Posted by Edward Moya on Sep 26, 2014 6:38:00 AM

WWM NASDAQ SEP 26 2014

Traders eagerly are awaiting today’s second quarter US GDP release to see if interest rate forecasts will target a rate hike sooner.  As quantitative easing fades, permanent bulls should be getting nervous as the stock market appears ready for potential range trading or maybe even a deep pullback. 

Following the worst decline in two months for technology stocks, US futures are expecting a positive open as we await the 8:30 AM est release.  Volatility could remain high as seasonality does support selling in September.  On the technical side, we also have price tentatively poised to remain below the 50-day SMA. 

The daily chart for the Nasdaq 100 currently shows a potential ABCD which supports the move lower.  Even if we see a positive bounce post today’s GDP report, we may see any rally faded this morning.  The reaction may be tricky today.  A solid beat of 4.5% or higher q/q could support the Fed to complete its tapering process and drive yields higher for US treasuries and that could be bearish for stocks.  A GDP miss and we could see a choppy reaction.  

Key support will come from the 3823 level, while 4130 remains resistance.  If we do see a deeper pullback target the 200-day SMA, which is currently trading near the 3775 zone, buying interest may return. 

The trade: Sell US Tech at 4040, with a stop loss at 4080 and a take profit at 3960.  The Risk/Reward Ratio is 1: 2

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

Topics: US Stock Market, NASDAQ, GDP, US statistics, NASDAQ OMX

 

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