Nasdaq Weekly Outlook: In-Depth Technical Analysis from Mr MarkeAs one of the leading global investment firms specializing in technical analysis for the US market, our mission is to deliver precise and actionable insights. This week, our focus is on the Nasdaq index, where we see potential for significant market moves as technical indicators signal a possible shift. Below, we provide a comprehensive analysis of key levels, patterns, and trading opportunities for the week starting Monday, August 26th, 2024.
Market Context
The Nasdaq index has shown remarkable resilience throughout the year, driven by strong earnings reports and macroeconomic stability. However, recent price action suggests that bullish momentum might be waning, with the market reaching a critical juncture.
In mid-July, the Nasdaq peaked at 20,690 (Point A), followed by a pullback to 19,463. The subsequent recovery attempt reached 19,720 (Point B), but the failure to surpass previous highs indicates a potential reversal in trend.
Key Technical Levels
Our analysis highlights the following precise levels that could define market direction:
Primary Resistance: 19,820 - 19,850
Secondary Resistance: 20,000 - 20,050
Primary Support: 19,600 - 19,620
Secondary Support: 19,463 - 19,480
These levels are crucial for understanding market behavior. A breach of support or resistance within these ranges will likely dictate the Nasdaq's next move.
Technical Patterns and Indicators
Double Top Formation: The peaks at Points A and B form a double top pattern, often associated with a trend reversal. This pattern becomes particularly significant if the market fails to hold above 19,600.
Bearish Divergence:
Our analysis identifies a bearish divergence on the Relative Strength Index (RSI), where the index's price made a lower high at Point B, despite the RSI indicating weakening momentum. This divergence is a strong signal of potential downside.
Volume Profile: There has been declining volume on recent upward moves, indicating that buying interest may be fading. This lack of strong buying pressure adds to the bearish sentiment.
Candlestick Analysis: The last few trading sessions have shown indecisive candlestick formations (e.g., doji and spinning top patterns) near resistance, suggesting market uncertainty. The absence of a strong bullish continuation pattern further supports the case for caution.
Projected Market Movement
Given the current technical setup, we foresee two primary scenarios unfolding in the coming week:
Bearish Scenario: If the Nasdaq fails to hold above 19,600 and breaks below 19,463, we anticipate a significant decline toward the 19,250 level. A further breach could open the door to a more profound correction, potentially targeting the 18,800 region.
Bullish Scenario
Conversely, if the index manages to break above 19,850 with sustained volume, the next resistance at 20,000 will be critical. A close above this level could reignite bullish momentum, targeting a retest of the 20,250 high.
Strategic Trade Recommendations
Based on the analysis, we recommend the following trades:
Short Position (High Probability):
Entry: Below 19,600 with confirmation from intraday price action.
Target 1: 19,463
Target 2: 19,250
Stop-Loss: 19,820 (just above resistance to minimize risk)
Long Position (Conditional):
Entry: On a clear break and close above 19,850, confirmed by volume.
Target 1: 20,000
Target 2: 20,250
Stop-Loss: 19,600
Range Trade (If the Market Consolidates):
Buy Near: 19,600 support with a tight stop below 19,463.
Sell Near: 19,820 resistance, with a stop just above 19,850.
These trades are designed to capitalize on the anticipated market movements while adhering to strict risk management protocols.
Final Thoughts
The Nasdaq is at a pivotal point, and the upcoming week could set the tone for the rest of Q3 2024. While the technical indicators point towards potential downside risk, traders should remain flexible and ready to adapt to evolving market conditions.
