We can say with certainty that the early days of 2022 for the highly technical NASDAQ have been terrible. 2021 ended near an all-time high and 2022 so far has been a year of misery and suffering. Of course, those words might be too strong, but I’m sure people who speak for a long time would agree entirely.
Post-pandemic trading in stocks and indices can be summed up in roughly one sentence: buy the downside! So when during these several months we had a correction, traders were eagerly awaiting the local decline to buy with vengeance. This created a lot of V-shaped reversals on the chart and frankly was a rock-solid approach for months. Will this also be the case now?
The reason we are wondering is that the NASDAQ is currently flirting with absolutely crucial long-term support. This support is created by the combination of two important lines: a horizontal and a dynamic. First the momentum – it’s an uptrend line, which connects crucial lows since June 2020 (blue). The horizontal is the area around 15,600 points (orange), which has already proven to be of great help throughout the month of December.
It is absolutely crucial that buyers buy the trough here and defend this area (green). If we see a breakout it would mean a long term sell signal and potentially huge problems for the tech index. The next few days should be really interesting.