On the 4-hour chart, is the Nasdaq 100 forming a classic downward retreat setup? Will the sellers re-enter the market, or will there be an upward breakout?
The NAS100 has been drifting lower, which first started all the way back to just below the 16,000.00 handle in mid-July, as can be seen on the four hour chart above.
The early September consolidation evolved into a strong negative -5% break to just beyond 14,400.00, making the most recent move quite significant. It was similar to negotiating a rough terrain with steep dips and bumpy routes.
But this is where things get complicated: The key question today is whether this rising momentum would tempt the sellers to re-enter the downtrend after we have had a lengthy recovery.
The market's future trajectory will undoubtedly depend on this week's packed macroeconomic calendar, but from a technical perspective, there are strong considerations that could encourage selling once more.
A convergence of technical components can be seen on the chart between the price ranges of 15,000.00 and 15,300.00. Simple moving averages, Fibonacci retracement levels, and a falling trendline are engaged in combat here.
Additionally, the stochastic indicator is indicating potential overbought short-term situations. This implies that, like a runner taking a rest after a race, the market might require a moment to regain its breath following the recent surge.
Here is the scenario: Should the NAS100 retrace to that convergence region and show bearish reversal patterns, we might see a surge in sellers that would send the index back into the downtrend. The swing bottom near 14,400.00 may be in danger, particularly if a significant bearish event materializes this week.
On the other hand, what if the plot has an unanticipated turn? We might see a sustained ascent over the convergence point if a strong catalyst emerges but draws buyers rather than repelling them.
The index could be on a path to revisit the September highs at 15,600.00 this week if a sustained break above the 61% Fibs, 200 SMA, and falling trendline pattern occurs; this would be a reasonable goal considering the average daily real range of 1.60%.
The index might be on a journey to revisit the September highs around 15,600.00 this week if a sustained break above the 61% Fibs, 200 SMA, and falling trendline pattern occurs. This would be a reasonable target given the average daily real range of about 235 points.
Use stop losses and risk management in your exit strategy no matter which bias you decide to trade!
