A series of large companies on the list will publish business results this week and investors have been warned not to expect them to be beautiful. Analysts have been predicting for weeks that this profit season will be the worst since the 2008 meltdown.
While that catastrophic market collapse was the result of dark financial constructions, the current crash is due to the economy has come to a complete standstill as governments attempt to halt the global coronavirus pandemic through strict lockdown measures imposed on communities in the United States and the world.
The consequences for many companies are serious: sales are declining, frozen activities and inactive labor. How damaging the blow has been will show up with their earnings results; Meanwhile, the chart below can provide guidance for the technical picture that is developing.
Nasdaq composite daily chart
Monday's trade delivered a double blow candle: a gravestone doji – a demonstration of a failed bullish attempt to gain ground and confirmation of Friday's hanging man – prompting bulls stimulated by the advance from the hanging man, to close positions after the next lower close. It is also possible that the advance of the hanging man was the result of short turns.
The hanging man and gravestone doji occurred exactly below 100 DMA, after the 50 DMA rose below 200 DMA last week, leading to a dreaded Death Cross, the most infamous technical milestone among economists and fundamental analysts.
The NASDAQ Composite is in an upward trend. A drop below the upward trend line since the March 23 bottom would increase the risk of a further decline until it puts a new trough below the March 23 low, creating a new bear market – after being triggered out of the bear market by COVID – Pandemic 19 that lasted only three weeks, a historic first.
For the time being, we expect a relapse towards the 8,300 area, where the 28 trough meets the upward line below the Death Cross.
Trading Strategies
Conservative traders would wait for the decline and recognizing demand above 8,000 levels would likely increase their position.
Moderate traders can buy the dip before waiting for confirmation of the support.
Aggressive traders could short-circuit the expected decline, provided they understand that it is against the trend and are willing and able to risk their capital.
Trade Sample – Short Position
Entry: 8,600 – after demonstration to test resistance again
Stop-Loss: 8,700 – above yesterday's highs
Risk: 100 points
Target: 8,300 – suspected support
Reward: 300 points
Risk: reward ratio: 1: 3
Note: A trade sample is a device for conveying key components of a coherent trading plan. Not every transaction can win. No trade is suitable for all traders. Feel free to change the entry points, stop loss and target according to your temperament and capital, but you have to act according to your pre-set plan, otherwise your trading results – good or bad – will be pointless.
