Featured Trade: Nasdaq 100 is backed at resistance

Nasdaq 100 may see another downleg below 7445

Short-term technical outlook on US Tech 100 (Fri, 03 Aug)

Key technical elements

  • Since hitting a low of 7157 on Mon, 30 Jul U.S. session after a 4.7% decline from its current all-time high level of 7517 printed on 25 Jul 2018, the US Tech 100 Index (proxy for the Nasdaq 100 futures) has managed to erase the losses inflicted in yesterday, 02 Aug Asian/European session from its minor low of 7206 reinforced by escalating trade tensions with U.S. and China. The U.S. White House has confirmed that President Trump asked U.S. Trade Representative Lighthizer to consider hiking tariffs to 25% on US$ 200 billion worth China’s imports as soon as next month.
  • Thereafter, a minor “V” shaped rally of 2.5% materialised for the Nasdaq 100 led by Apple, the biggest component stock in Nasdaq 100 with a weightage of around 12% rose by 2.92% to print another fresh all-time closing high of 207.39 that made it the first U.S. based firm to cross above the U.S $1 trillion market capitalisation. Yesterday, 02 Aug bullish share price movement of Apple came despite increasing trade tensions between U.S. & China (ranked 3rd in terms of revenue contribution based on geographical region after the Americas & Europe) and no new “firm based specific” catalyst as the Apple’s fiscal Q3 2018 earnings results had been released earlier on Tues, 31 Jul after the closure of the U.S, stock market. Thus, the push up of the Index can more attributed to short covering.  
  • From its shorter-term hourly chart, yesterday’s high of 7386 has managed to stall at the pull-back resistance of a former minor ascending trendline support from 28 Jun 2018 low of 6935 which confluences with the 61.8% Fibonacci retracement of the recent decline from its all-time high of 7517 to 30 Jul 2018 low of 7157 and the former minor swing low areas of 25/27 Jul 2018 (see 1 hour chart).
  • From Elliot Wave/fractal analysis perspective, the up move seen from 30 Jul low of 7157 to yesterday, 02 Aug high of 7386 may be a minor corrective rebound wave 2/ to retrace the prior 5-wave bearish impulsive minor degree wave 1/ from 26 Jul high of 7517 to 30 Jul low of 7157. Thereafter, a potential bearish impulsive wave 3/ is likely to materialise.
  • The hourly Stochastic oscillator has started to turn down from an extreme overbought level coupled with the daily RSI oscillator that is still being capped by a corresponding descending resistance at the 60 level.
  • The key short-term pivotal resistance will be at 7445 which is defined by a Fibonacci retracement/projection cluster and the minor swing high area of 27 Jul 2018.     

Key Levels (1 to 3 days)

Intermediate resistance: 7380

Pivot (key resistance): 7445

Supports: 7282 & 7160

Next resistance: 7560


Therefore as long as the 7445 short-term pivotal resistance is not surpassed, the Index may see a slide back to retest the intermediate support of 7282 (former minor swing high of 01/02 Aug 2018. A break below it reinforces the down move back towards 7160.

On the other hand, a clearance above 7445 triggers a squeeze up towards the 7560 major resistance (the upper boundary of the ascending channel in place since Jun 2016 low & Fibonacci projection cluster).

Charts are from City Index Advantage TraderPro

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.