Nasdaq Ripe for Profit-Taking

After recent gains, some traders may wish to hear the cash register ring. But the overall trend is still for higher prices

By Paul Cherney

The Nasdaq is ripe for short-term profit-taking and a consolidation of the recent gains.

For Friday, if the Nasdaq's open is a gap higher (something like a 1.75% to 3.00% jump for the opening print), it will probably prompt position traders (traders who hold positions for a few trade days) and day traders, to make the cash register ring (sell into strength).

That's one possible scenario. Another possible scenario is weakness at the open, a failed attempt at a rally and then lower prices.

Even though the overall trend is for higher prices, the Nasdaq appears ripe for some consolidation. The NASDAQ is up about 17% from its Jan 3, 2001 low of 2251.71. The Nasdaq is up about 14.8% from Monday's low print of 2299.65, somebody is going to want to take profits.

The intermediate term trend (the next couple of weeks) for the Nasdaq and the S&P 500 remains tilted in favor of higher prices, but the market is ripe for consolidation and short-term profit-taking on any day now.

The Nasdaq is currently inside the 2588-2645 area of resistance. A move above 2645 finds the next area of resistance 2676-2726 with a focus of resistance in the 2688-2711 area.

Immediate Nasdaq support (intraday) is now 2620-2604 and 2586-2550. I know the following price level is not going to make a lot of people happy, but at sometime over the next 2 trade days, the Nasdaq could drop to print in the next layer of support which is 2523-2482.

Cherney is Standard & Poor's Market Analyst

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