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The Nasdaq Composite Index and the NDX 100 both hit their 50% retracement levels, at the same time of late. This 50% Fib level should be a little more important, due to its based upon the 2000 highs and 2003 lows. As they were doing so, they also formed rising wedges, which two-thirds of the time suggest lower prices are around the corner.
From a portfolio construction angle, this situation would suggest to harvest tech long positions at resistance and if you are a very aggressive investor, this pattern reflects a good place to own shorts, with the 50% Fib level as the stop loss….this way if the NDX breaks above the 50% Fib level, the stop is tight.
