Featured Trade: Nasdaq 100 looks set to resume its potential impulsive downleg

A potential goodbye to Nasdaq 100 post Xmas rally.

Short-term technical outlook on US Tech 100 (Wed, 02 Jan)



Key technical elements

  • The post-Christmas rally of 10.5%  seen on the US Tech 100 Index (proxy for the Nasdaq 100 futures) from its 26 Dec 2018 low of 5803 is likely to have reached an exhaustion/inflection level right below 6405 key medium-term resistance (the pull-back resistance of the former descending range support from 29 Oct 2018 low, former medium-term swing low area of 02/25 Apr 2018 & 50% Fibonacci retracement of the recent steep decline from 12 Dec high to 25 Dec 2018 low).
  • The aforementioned rally of 10.5% has appeared to be more of a corrective/dead-cat rebound rather than an impulsive bottoming sequence. Firstly, it has traced out a minor bearish reversal “Ascending Wedge” range configuration since 26 Dec 2018 low of 2018 and in today, 02 Jan European session, it has staged a bearish breakdown from the” Ascending Wedge. Interestingly, a similar pattern/fractal was played out from 10 Dec 2018 low before the recent steep decline of 15.5% materialised. Secondly, momentum remains weak as the daily RSI oscillator remains below the 50-level coupled with a bearish divergence signal seen in the shorter-term hourly RSI while price action of the Index has continued to inch higher since 25 Dec 2018 low.
  • The key short-term resistance stands at 6293 which is defined by the former minor swing low area of 29 Dec 2018 and the 61.8% Fibonacci retracement of the on-going decline from today, 02 Jan Asian session high of 6371 to today, European session current intraday low of 6141.
  • The next significant near-term support after the recent Dec 2018 low of 5820/03 rests at 5580/70 which is defined by a Fibonacci extension cluster and the medium-term swing low area of 18 May/04 Jul 2017.

Key Levels (1 to 3 days)

Intermediate resistance: 6210

Pivot (key resistance): 6293

Supports: 6063, 5820/03 & 5580/70

Next resistance: 6405

Conclusion

Therefore, the Index is likely to resume its potential impulsive downleg sequence in place since 03 Dec 2018 high. If the 6293 short-term pivotal resistance is not surpassed, the Index may shape a direct drop to retest the 26 Dec 2018 swing low area of 5820/03 and a break below it opens scope for a further potential downside to target the next support at 5580/70.

On the other hand, a clearance above 6293 put the bears on hold for another round of corrective push up to test the 6405 key medium-term resistance.

Charts are from City Index Advantage TraderPro



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