Option Investor
Market Updates

Where will the NASDAQ be on April 1st\?

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Most people know that April 1st is April Fool's Day. I've had a lot of questions from subscribers recently on what the current supply/demand charts are telling us about the NASAQ Composite and I'm going to go out on a limb here and say "the NASDAQ Composite could see 3,250 by April 1st." No fooling! Here's why and it's based purely on the technicals.

NASDAQ Composite Supply/Demand Chart - 50-point scale.

Yesterday, the NASDAQ Composite gave us a "sell signal" on our supply/demand chart when the 2,650 was hit. What's interesting about this "sell signal" and yesterday's action is how this index has turned right around at the 2,600 level, the same level where we got our first "buy signal" back in early January and our bullish price objective of 3,250. If I'm trying to correlate levels (I always am as a trader) I'm taking notes at 2,600. Traders will also note the blue +'s marked "Bullish Support". This is recognition of a new trend put in place with our "Bearish Resistance" (red +) recently being broken. Bullish traders are taking note of the recent sell signal yesterday at 2,650 as a "warning" that they should be loading the truck up at current levels. From an institutional perspective, yesterday and today are good times to be accumulating, but not loading up. Now, a couple of weeks ago we established a bullish price objective of 3,250 using the vertical count; lets try and determine a time frame for that level.

NASDAQ Composite Index Chart - Daily Interval.

Supply/demand charts don't reference time as many traders are used to. We can, however, project trends on a bar chart to try and establish time frames. We do this to help with our OPTION strike prices and contract expiration dates. If (I stress IF) a trader believes in the above scenario and wants to play the QQQ's in an option trade, it would make sense to be looking at April expiration. Sure, we could pick a shorter time frame, even a longer time frame, but now we have some type of plan that gives hint to a prudent April expiration near 3,250.

Don't load up!

Before everyone rushes out and loads up on QQQ's for April, remember yesterday's "sell signal" on our supply demand chart. The prudent move would be to wait for Cisco's earnings after the bell today, then monitor the MARKET response once trading opens tomorrow. If things look good, gradually ease into a long position tomorrow. We can always add to that position at a higher price or on a pullback after a strong upward move!

Jeff Bailey
Staff Analyst

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