Stocks set to open lower, should you buy?
Nasdaq Much Weaker
The technology Nasdaq 100 futures contract was weaker than the broad stock market on Friday, and it continues to be relatively weak this morning. It trades within an intraday downtrend after breaking below the level of 7,000. The market gained more than 1,000 points off its February 9 bottom, as it remarkably retraced all of its late January - early February sell-off in one month. So, it looks like a downward correction following this rally. However, a breakdown below 7,000 mark means that bulls are losing the battle here. The nearest important level of resistance is now at around 6,980-7,000, and support level is at 6,900, among others. The Nasdaq futures contract trades below its intraday downward trend line, as the 15-minute chart shows:
Two Biggest Market Caps Likely to Go Lower
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com) again. The market reached new record high on Tuesday, but then it reversed its intraday uptrend and closed below $180. We saw some negative medium-term technical divergences - the most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI or MACD based on the index). In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low. On Tuesday, the market formed a negative candlestick chart pattern called "bearish engulfing". It consists of a smaller white candlestick followed by a black candlestick that "engulfs" the white one. This downward reversal pattern has been confirmed by Wednesday's move down. The price could reach its short-term upward trend line today, but will it bounce or break below that support level? It will probably break lower: