NDX, NASDAQ 100 INDEX – Technical Outlook:

  • The Nasdaq 100 index has scope to rise further
  • The retreat since last week doesn’t appear to the start of a new leg lower
  • To what extent can the index rise and what are the key levels to watch?

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The retreat since last week in the Nasdaq 100 index doesn’t appear to be the start of a new leg lower. Instead, the index could rise further in the short term.

The Nasdaq 100 index has pulled back in recent days from the upper edge of a rising channel from mid-October. However, there is quite a strong cushion at the resistance-turned-support at the late-October high of 11682. Moreover, the drop this week is about a 38.2% retracement of the November rise, which is a reasonable retracement and not an indication of the start of its well-established downtrend, just yet.

NASDAQ 100 Daily Chart


Chart Created Using TradingView

In this regard, one of the signals that would point in the bearish direction would be a fall below 11682. Such a break would confirm that the short-term upward pressure had faded. The November 8 high of 11192 would then come into focus. The October low of 10441 would continue to provide a fairly strong cushion in the event there is a renewed risk lower.

NASDAQ 100 INDEX Weekly Chart


Chart Created Using TradingView

For now, though, the bias continues to be up. Positive divergence on the weekly charts of the Nasdaq 100 index at the October low confirms that the multi-month slide has lost steam. Furthermore, the mid-November break above 11682 (resistance then) was an initial confirmation that the tide is turning for the index.

NASDAQ 100 INDEX Hourly Chart


Chart Created Using TradingView

The odds are high that the index could rise toward the 200-day moving average (now at about 12625), near the price objective of the minor double bottom (the October and the November lows) of 12750. The last time the index was decisively above the long-term moving average was in January. Hence a cross-over of the average would be a sign that the medium-term downward pressure was fading. Still, the August high of 13721 would pose a significant threat to a lasting recovery.

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— Written by Manish Jaradi, Strategist for DailyFX.com

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