Featured Trade: Nasdaq 100 Potential bearish reversal below key resistance

Potential bearish reversal in U.S. stock market

Short-term technical outlook on US Tech 100 (Wed, 17 Jan)



Key technical elements

  • The ongoing post-Christmas up move of 15% has hit a key medium-term resistance at 6720/25 as per defined by the former primary ascending trendline support from Feb 2016 (the capitulation point post-shock CNY devaluation), the former medium-term swing low area of 29 Oct 2018 and close to the 50% Fibonacci retracement of the previous medium-term impulsive down move from 01 Oct 2018 all-time high of 7700 to 26 Dec 2018 low (see daily chart).
  • Yesterday, 16 Jan price action of the Index has formed a bearish daily “Shooting Star” candlestick pattern at the end of the U.S. session. Interestingly, in today, 17 Jan Asian session, the Index has a negative follow through in price action as it staged a bearish breakdown below the minor bearish “Ascending Wedge” range configuration in place since 26 Dec 2018 low (see 1-hour chart).
  • The next significant near-term support rests at 6515 (the minor congestion zone from 10/14 Jan 2019 & 23.6% Fibonacci retracement of the rebound from 26 Dec 2018 low to 16 Jan 2019 high) and 6385 (former minor swing high areas of 29 Dec 2018/03 Jan 2019 & 38.2% Fibonacci retracement of the rebound from 26 Dec 2018 low to 16 Jan 2019 high).

Key Levels (1 to 3 days)

Intermediate resistance: 6660

Pivot (key resistance): 6720/25

Supports: 6515 & 6385

Next resistance: 6860

Conclusion

The recent rebound of 15% from its Dec 2018 low of 5803 has almost recovered 50% of the impulsive decline from its current all-time high of 7700 printed on 01 Oct 2018. Interestingly, the on-going recovery has reached a significant medium-term resistance of 6720/25 and has formed several bullish exhaustion elements (the on-going rebound has taken on a form of bearish “Ascending Wedge” range configuration & yesterday’s price action ended with a bearish reversal “Shooting Star” candlestick pattern).

If the 6720/25 pivotal resistance is not surpassed, the Index may start to undergo another phase of potential impulsive downleg sequence to target the near-term supports at 6515 and 6385 in the first step.

However, a clearance above 6720/25 invalidates the bearish scenario for a further squeeze up towards the next intermediate resistance at 6860 (swing high areas of 06/13 Dec 2018).   

Charts are from City Index Advantage TraderPro



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