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CFD: Ideas You Can Trade - USTech100 Correction Fears

Posted by Steven Hatzakis on Mar 25, 2015 5:01:00 PM

USTech100: market closed near session low after sharp drop where support line was reached, if this line fails tomorrow a deeper correction could be looming  

The short term daily candle chart below shows the price history of the USTech100 contract for difference (CFD) - which aims to track the underlying NASDAQ index. Today USTech100 is near 4332.1 around time of publication, and just over an hour after the US stock market closed lower today in New York.

Last time this index CFD was reviewed in Ideas You Can Trade, the momentum was turning bullish, and since December USTech100 pushed towards new multi-year highs (close to its all-time high) with the underlying index reaching above 5000 during March. Since last weeks high however the trend is turning bearish and was fueled with today's sharp move lower as fears of the imminent hike in interest rates by the US fed and the worse than forecast rise in inflation that was just released - helped drive the market sell off today.

Today's move was very bearish also because the market closed near session lows, although that area also coincided with a medium term support line (see purple bullish line on chart below). If this support line fails (for example, during tomorrow's trading session) a lower-low should follow and USTech100 could return towards 4,000. Aside from today's bearish move, a less contrarian position is that the trend is still very bullish and buyers may look for entries after today's pullback -and considering the support line is still holding (and if that continues).

From a longer term perspective a correction could be looming as the overall strong bullish trend hasn't had a big pull-back since September, and the long term bullish support lines (green lines on chart below) are still well-underneath current levels and closer to the 3500 area (which is an area where the market could pivot during a correction before returning towards current levels or higher). 

Below are examples of how to trade a bearish continuation or a bullish reversal:

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 4401.0 with a Limit to take profit @ 4490.0 and a stop-loss @ 4347.0 Risk/Reward Summary: Limit risk = +89 points profit / (-54) Stop-loss risk = Gain to Loss ratio = 1.64

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 4313.0 with a Limit to take profit @ 4139.0 and a stop-loss @ 4405.0 Risk/Reward Summary: Limit risk = +174 points profit / (-92) Stop-loss risk = Gain to Loss Ratio = 1.89

Short term daily candle chart (zoomed-in):

USTech100Daily March 25th zoom

Short term daily candle chart (zoomed-out):

USTech100Daily March 25 2015 note

Topics: US Stock Market, contract for difference, UStech100, technical analysis, cfd, Forex, Ideas You Can Trade, Wall Street, NASDAQ, US Tech 100


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