The stock market indices in the United States started the month of March with a bullish reversal. After the Nasdaq 100 index dropped over 3% to close February, it bounced strongly from the lows on the back of the new stimulus bill passing the House.
The enthusiasm on the stock market remains unabated as more and more data points to a stronger economic recovery than initially thought. Yesterday, the ISM Manufacturing in the United States printed over 60 for the month of February, showing overheating conditions and fueling optimism of a stronger recovery.
Because this week is the NFP week, the price action may continue on the same note until Friday’s release. Traders will look for hints in the upcoming data, such as the employment component in the ISM Non-Manufacturing, the ADP on Wednesday, or the Initial Claims on Thursday. Any positive outcome should put a floor behind stocks, so a new run at the highs is possible.
Nasdaq 100 formed a double bottom on the recent move lower. Moreover, the move higher resembles an inversed head and shoulders pattern that has a measured move pointing to new highs. Bulls may want to remain on the long side with a stop at the lows and targeting a risk-reward ratio of 1:2 or even more.
