« Chart in Focus: Rising Wedge Reversal on NDX (3) »

Nasdaq-100 Index daily chart showing defunct rising wedge formationThe rising (bearish) wedge reversal on the daily chart of NDX, which has been the "Chart in Focus" since last Wednesday, is now essentially defunct.  As such, there will be a new 'Chart in Focus,' starting this weekend.

Before moving on, however, let's take a look at why the formation is now likely defunct.

The index found support from its 20dMA (not seen on this chart), a couple of days ago and since then has moved back towards the minor/intermediate highs that were put in place last week. In order for the wedge to have continued to be seen as legitimate, prices would have had to have stayed below the wedge breakout level of 1615 or so.

Moreover, once the initial retest of the lower wedge line was complete (a day after the breakout), there should have been an immediate rise in volume, accompanied by a swift decline in the prices.

The lack of a sharp increase in volume, together with the timid drop in price levels into the 20dMA, should have been a forewarning that the wedge was set to fail.

Now, we will know in due course whether a minor top is being put in place or not (there are still a couple of sell signals on the momentum indicators) but with today's move to an equalling of recent closing highs, the rising wedge is now no longer to be considered a legitimate formation.