The NASDAQ has broken above a short-term downtrend channel, suggesting it will reach new highs imminently, according to Andy Dodd, Head of Technical Research at Louis Capital Markets.
Dodd points out that the NASDAQ future has continued to make both higher highs and higher lows, which by definition is an uptrend (see Chart). However, last Monday (11 May) saw a rejection of the initial gap higher and the move lower into that close left a Bearish Engulfing candlestick, which was a sign of limited further upside.
Yesterday (18 May), however, saw the future break above the short-term downtrend channel and Dodd says the resulting Flag suggests, despite the engulfing candle, it will break to new highs very soon. As such, he says the uptrend remains intact for both the short- and medium-term.