Nasdaq In Red Zone As Bearish Engulfing Pattern Hints At Further Downside

The Nasdaq 100 had a tough session on Thursday, marking its worst performance since the month began, mirroring the drop seen on Aug. 2, with a significant 2.2% decline.

Today’s price action completely reversed the gains experienced in the previous session, when the Nasdaq was up by 1.6%.

Even Nvidia Corp.’s NVDA monstrous earnings in the Q2 failed to uplift sentiment within the tech stock sector. Despite opening over 5% higher, the semiconductor giant closed the day flat.

Bulls driving the Nasdaq retreated from trying to surpass the 50-day moving average, signaling doubts about the recent session’s recovery. The relative strength index (RSI) was unable to surpass the 50 threshold, signaling a resurgence of bearish sentiment.

Thursday’s price action created what’s known as a bearish engulfing pattern on the chart. This materialized as the red candle entirely overshadowed Wednesday’s green candle. A bearish engulfing pattern serves as a technical cue pointing toward impending price weakness.

Read also: How to Read Candlestick Charts

Nasdaq 100 Daily Chart: Moving Average, Bearish Engulfing And RSI

The bearish engulfing pattern gains additional strength when the opening price of the red candle significantly surpasses the closing price of the preceding green candle. Moreover, when the closing price of the red candle notably dips below the opening price of the green candle, the pattern’s reliability further solidifies. Both these conditions were met on Thursday.

If this bearish signal indeed holds true, the next support level for the Nasdaq 100 lies at the 100-day moving average, positioned around 14,376. Looking further ahead, there’s the 38.2% Fibonacci retracement level, calculated between this year’s highest and lowest points, standing at 13,929.

Right now, investors in the tech sector, tracked by the Invesco QQQ Trust QQQ, are focused on the imminent Jackson Hole Economic Symposium. The pivotal event takes place on Friday, with Fed Chair Jerome Powell set to speak at 10:05 a.m ET.

Read now: Jackson Hole Fed Symposium 2023: What Should Investors Anticipate From Powell’s Address?

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