Featured Trade: Nasdaq 100 rallied to key medium-term inflection level, risk of fresh downleg

Nasdaq 100 at key medium-term inflection/resistance zone with risk of fresh downleg as Apple earnings results looms.

Short-term technical outlook on US Tech 100 (Thurs, 01 Nov)



Key technical elements

  • In our previous “Featured Trade” report dated on 26 Oct, the US Tech 100 Index (proxy for the Nasdaq 100 futures had staged the expected corrective rebound and met the 7000/7050 resistance/target (printed a high of 7031 in yesterday, 31 Oct U.S. session). Click here for a recap.
  • The on-going up move in place since last Fri, 26 Oct has reached a key medium-term inflection/resistance zone of 7000/7050 which is defined by the pull-back resistance of a former primary ascending channel support from Jun 2016 low, the former swing low area of 10 Oct 2018, upper boundary of a descending channel from 01 Oct 2018 high and a Fibonacci retracement/cluster.
  • Elliot Wave/fractal analysis suggests that the choppy range movement that started from its 26 Oct 2018 low of 6726 is likely to be a corrective expanded a-b-c “Flat/sideways range configuration. In addition, the micro/minute wave structure of its final c upleg structure from 29 Oct 2018 low of 6573 may have reached a terminal point at 7030 to end the on-going “Flat/sideways range” where at least a minor bearish reversal may materialise next.
  • The prior bullish divergence seen in the daily RSI oscillator has reached a significant corresponding resistance at the 50 level coupled bearish divergence signal seen in the short-term 1-hour Stochastic oscillator at its extreme overbought level in yesterday, 31 Oct U.S. session.

Key Levels (1 to 3 days)

Intermediate resistance: 7000

Pivot (key resistance): 7050

Supports: 6900 (trigger), 6700, 6575 & 6435

Next resistance: 7350/400

Conclusion

The recent corrective rebound has reached a key medium-term inflection zone and elements as per highlighted above are advocating that the Index may stage a bearish reversal at this juncture with the impending Apple’s Q4 earnings results out later today after the close of the U.S. session. Apple is a key component stock of the Nasdaq 100 with the highest weightage of around 13% in terms of market capitalisation.   

If the 7050 key medium-term pivotal resistance is not surpassed and a break below 6900 (minor ascending trendline from 30 Oct 2018 low) is likely to reinforce the start of another potential impulsive downleg to retest the recent swing lows of 6700/6575 before targeting the medium-term support of 6435 (lower boundary of the medium-term descending channel from its 01 Oct 2018 all-time high, 25 Apr 2018 swing low & 0.618 Fibonacci projection of the current decline from 01 Oct 2018 high).

However, a clearance above 7050 invalidates the bearish scenario for an extension of the corrective rebound towards the 7350/7400 resistance (17 Oct 2018 swing high & the neckline resistance of the recent bearish “Double Top” breakdown”).     

Charts are from City Index Advantage TraderPro


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