Nasdaq 100 Overbought

Posted by downtowntrader | 4/15/2007 09:37:00 PM | 0 comments »

In looking at the index charts this weekend, I noticed that they were becoming overbought already and heading into resistance. This is usually a recipe for further weakness or consolidation. The indices have been steadily climbing on low volume and something will have to give soon. Either they will roll over, or volume will come in on a short squeeze to new highs. They could really go either way here.

Here is a chart of the Q's showing how it's overbought on several different levels. In an uptrending market, a stock can remain overbought for quite some time. However, in a range bound market, a stock will usually oscillate quite regularly. The question is whether the Nasdaq 100 will begin trending here, or if it is still range bound.

PowerShares QQQ Trust, Series 1 (ETF) (Public, NASDAQ:QQQQ)

There are conflicting signals right now. While the indices may be overbought, there is still a lot of bearish sentiment and they are finding support at their rising 20smas. I also found a lot of good looking chart setups this weekend for long plays. I think the play right now is to stick to long setups and be ready to hedge with the inverse index ETF's such as QID and TWM.

ZOLL Medical Corporation (Public, NASDAQ:ZOLL)
Here is an interesting chart I found this weekend. ZOLL has retraced to the 61.8% fibonacci level, and has been consolidating in a pretty tight range. While this is probably not ready to bust out, it looks like a decent place for core traders to enter with a nice stop under the recent base.

TurboChef Technologies, Inc. (Public, NASDAQ:OVEN)
OVEN is one of the better looking charts I turned up. This may be completing what I term a partial retrace. Notice how OVEN has been making lower highs and lows in this pullback. Now it may be stopping short of completing the established trend of lower highs and lows, therefore making a partial retrace. If it does set a higher low here, then it may be an early signal that the trend is changing to an uptrend.

IntercontinentalExchange, Inc. (Public, NYSE:ICE)
ICE was one of the hottest stocks early this year, and has had a healthy pullback. It may be turning back up here and it sure looks like it will try and fill the bearish gap it left on 2/27/2007.

New Oriental Education & Tech. Group Inc (Public, NYSE:EDU)
EDU is a low volume choppy smallcap, but it is capable of nice moves. It is close to breaking out of a triangle like base and could be headed to new all time highs.

MEMC Electronic Materials, Inc. (Public, NYSE:WFR)
WFR just broke out of a small base and is looking at it's first pullback to a rising 20sma. This is usually a decent place to jump into the trend.

Snap-on Incorporated (Public, NYSE:SNA)
SNA broke out of a tight base in early February, but has since dipped back to the base. It looks like it may be reversing here and could be headed back to test the breakout highs.

Since the markets could just as well reverse here, I am highlighting a couple short setups. I usually won't short when the indices are over their 50 day sma's, but depending on the action the next few days, I will be keeping an eye on these.

Continental Airlines, Inc. (Public, NYSE:CAL)
CAL broke down on a head and shoulders top and has just retraced back to the neckline. This should serve as resistance, but there are a couple things that worry me on this chart. It found pretty good support on the rising 200sma and broke a minor down trendline. I am still watching it though, because the head and shoulders top is usually a good one.

ConAgra Foods, Inc. (Public, NYSE:CAG)
CAG had a similar breakdown, although the retrace has been no where as potent as CAL's. Here it is threatening to fall out of a little continuation triangle therefore resuming the downtrend.

Good Luck,