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Will Nasdaq Breakout?

Nasdaq remains one of the largest and first global automated electronic exchanges for buying and trading securities. Nasdaq was originally an acronym for the National Association of Securities Dealers Automated Quotations. Nasdaq opened for trading in 1971. It operates in 29 financial markets, one central clearing house, and five central securities depositories in the United States and Europe.


There are over 5,000 companies listed and tradeable on the Nasdaq. Many of the companies listed are growth and technology-related companies. Two different markets make up the Nasdaq – the Nasdaq National Market and the Nasdaq Small-cap Market. The Nasdaq Composite Index (COMPQ) has over 2,500 stocks, including the Magnificent Seven technology giants.


The Nasdaq Composite Index (COMPQ – 14,226.22) recorded an all-time high of 16,212.23 on 11/22/21. The index soon entered a cyclical bear decline, losing 6,203.40 points or -38.26% before finding a bottom at 10,088.83 (10/13/22). Since the October 2022 low, COMPQ has rallied 4,357.72 points or 43.19% to a recent high of 14,446.55 (7/19/23).


The question then becomes, will the Nasdaq Composite Index break out?


It is not wise to bet against the U.S. equities markets, including COMPQ, as there is a built-in upward bias in stocks, at least from a longer-term perspective.


Despite the setback in stocks in the past two years, a potentially bullish cup and handle pattern has developed in COMPQ.


COMPQ has already surpassed the critical 61.8% retracement (13,873) from Nov 2021 to Oct 2022 decline. Also, the index has recently cleared above the 50-day ma (13,496.96) and the 200-day ma (13,046.35), with both moving averages currently trending higher.


The next challenge for COMPQ is to break out above key resistance at 14,446.5-14,647 (Mar 2022 and Jul 2023 highs) or the neckline of the cup and handle pattern. A breakout further solidifies the Oct 2022 low as a significant market bottom and allows for a retest of the November 2021 all-time high (16,212.23).


Below are the key technical levels for COMPQ:


Resistance 1 = 14,423-14,446.5/14,647 (Jul/Nov 2023 highs/Mar 2022 highs)

Resistance 2 = 14,916 (Nov 2023 channel breakout target)

Resistance 3 = 15,319-15,403 (1/12/22 and Sept 2021 highs)

Resistance 4 = 15,901.5 (Dec 2021 highs)

Resistance 5 = 16,212-16,349 (11/22/21 all-time highs, Jun 2023 breakout target, and breakout above 14,446.55 projection)


Support 1 = 13,805-14,003 (11/14/23 gap-up)

Support 2 = 13,700-13,714 (11/10/23 breakout and 38.2% retracement)

Support 3 = 13,479-13,579 (50-day ma, extension of Jul 2023 downtrend channel breakout, and 50% retracement)

Support 4 = 13,257-13,345 (11/3/23 gap-up and 61.8% retracement)

Support 5 = 13,072-13,177.5 (11/2/23 gap-up, Aug 2023 lows, and 200-day ma)

Support 6 = 12,859-12,963 (Sept 2023 lows and 11/1/23 gap-up)

Support 7 = 12,543.86 (10/26/23 reaction lows)


Source: Chart courtesy of StockCharts.com
Source: Chart courtesy of StockCharts.com

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