Featured Trade Nasdaq 100 at risk of mean reversion decline

Short-term technical outlook on Nasdaq 100/ US Tech 100 Index (Fri 22 Mar)

Key technical elements

• The recent rebound of 8.3% seen on the US Tech 100 Index (proxy for the Nasdaq 100 futures) has reached a key inflection zone of 7517/60 which is defined by the pull-back resistance of its former primary ascending channel support from Jun 2016 low and a 1.00 Fibonacci expansion of the on-going up move from 26 Dec 2018 low to 18 Jan 2019 low projected from 29 Jan 2019 low.
• The distance between the daily time frame upper and lower Bollinger Bands has started to expand to its widest distance since 08 Mar 2019 swing low of 6936 which indicates that high volatility expansion that tends to lead to a mean reversion decline in price action.
• In addition, momentum indicators such as the daily RSI oscillator has started to inch down from its overbought region coupled with a bearish divergence signal seen in the shorter-term hourly Stochastic oscillator. These observations suggest that recent upside momentum of price action may start to ease.
• The next significant near-term supports rest at 7370 (minor ascending trendline from 12 Mar 2019 low & 23.6% retracement of the recent up move from 08 Mar 2019 low to 21 Mar 2019 high) and 7285 (minor congestion area of 14/18 Mar 2019 & 38.2% retracement of the recent up move from 08 Mar 2019 low to 21 Mar 2019 high).

Key Levels (1 to 3 days)

Pivot (key resistance): 7517/60

Supports: 7370 & 7285

Next resistance: 7700 (all-time high)

Conclusion

If the 7517/60 key pivotal resistance is not surpassed, the Index may stage a minor mean reversion decline in first step to target 7370 and 7285.

However, a clearance above 7560 sees the continuation of the steep rally to challenge the 7700 current all-time high printed on 01 Oct 2018.