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Featured Trade Nasdaq 100 minor bounce cannot be ruled out before new potential decline

Article By: ,  Financial Analyst
February 7, 2019 11:51 PM

Short-term technical outlook on Nasdaq 100 (Fri, 08 Feb)

Key technical elements

  • The US Tech 100 Index (proxy for the Nasdaq 100 futures) has staged the expected push up as per highlighted in our earlier “Featured Trade” report dated 31 Jan 2019 and hit the upper limit of the key medium-term resistance zone at 6975/7020 (printed an intraday high of 7034 on 06 Feb 2019). Click here for a recap.
  • Yesterday’s (07 Feb) price action has staged a reaction off the 7020 key medium-term resistance and tumbled by 2.5% to print a low of 6853 in the U.S. session. The 7020 key medium-term resistance is defined by the upper limit of the minor bearish “Ascending Wedge” range configuration in place since 26 Dec 2018 low and the 0.618 Fibonacci expansion of the on-going rebound from 26 Dec 2018 low to 09 Jan 2019 high projected from 14 Jan 2019 low.
  • The Index has formed a daily bearish “Evening Star” candlestick pattern below the 7020 key medium-term resistance with the daily RSI oscillator that has managed to remain below a significant corresponding resistance at 60 level. These observations suggest the medium-term upside momentum of the on-going rebound from 26 Dec 2018 low has started to wane and the Index may start to shape a medium-term bearish reversal below 7020.
  • In the shorter-term after yesterday’s decline of 2.5% from 06 Feb 2019 high of 7034, the hourly Stochastic oscillator is now coming close to an extreme oversold level. In addition, Elliot Wave/fractal analysis has suggested that the on-going slide from 06 Feb 2019 high of 7034 is likely to be coming close to complete a minor downleg sequence with its extended 5th wave target at 6828, close to the lower limit of the minor “Ascending Wedge” now acting as a support at 6817 (see 1-hour chart)
  • Therefore, the Index may stage a minor rebound first if it manages to hold at 6828/17 towards the intermediate resistance zone of 6937/60 (50%/61% Fibonacci retracement of yesterday’s slide from 06 Feb 2019 high & the former minor swing high areas of 01/05 Feb 2019) before another potential fresh downleg materialises.
  • The next significant near-term support rests at 6610 (the minor swing low areas of 17/29 Jan 2019)

Key Levels (1 to 3 days)

Intermediate resistance: 6937/60

Pivot (key resistance): 7020

Supports: 6817 & 6610

Next resistance: 7130

Conclusion

If the potential minor bounce manages to hold below the 7020 key medium-term pivotal resistance, the Index is likely to shape another round of potential impulsive downleg sequence to target the next near-term support at 6610.

However, a clearance with a daily close above 7020 sees a further squeeze up towards the next intermediate resistance at 7130 (the swing high of 03 Dec 2018).



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