Nasdaq 100 extremely oversold

The Nasdaq 100 has been down for 10 consecutive days. This index normally has a tendency toward short term mean reversion, and the current down streak is the longest ever since the index was started in 1985.

The 5-day RSI is 7.88 which is  in extreme oversold territory. Generally a 5-day day RSI of 30 or less means the index is quite oversold and 20 or less is pretty rare. You almost never see a 5-day RSI below 10.

Based on history, there is a good chance for a short term one to three day bounce in the Nasdaq 100  next week. You can use QQQQ as a proxy for the Nasdaq 100. But since this is only a short term mean reversion trade, you should make sure to have an exit strategy worked out in advance. On an intermediate term time frame, the Nasdaq 100 could very easily resume its downtrend after a quick bounce.

Full disclosure: No Position.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s