With Apple losing its luster over the last few weeks, the Nasdaq Composite ($QQQ) has also hit a few stumbling blocks. However, with the recent weakness we are able to see clearly defined support and resistance areas created which we’ll look at today.
As you can see in the chart below, the 38.2% Fibonacci retracement level from the June low to the September high has been an area of trouble for the Nasdaq ETF to get through. When we see a security falter at a level of resistance we can look at momentum to see if it is trailing off or if it was just as strong as the first attempt to break through resistance. In this case, momentum, based on the Relative Strength Index, was just slightly below the previous test. What’s more important is to note that bulls were unable to get enough momentum strength to get the indicator over the 60-level, not a good sign for further price advancement.
So we know the level the ETF needs to break above to continue the rally, but what are the possible levels of support? There are two places that I see where support could be found; both are previous gaps during the recent advance. On November 28th, we saw $QQQ touch the second created gap area that’s been highlighted on the chart around the $64.30 area. The 61.8% retracement level also sits just below $64 adding another layer of support if we do in fact fall that far. If both of these zones do not hold up we have the gap from mid-November to monitor for bulls to start coming back in. This gap can be found between $63 and $62.
The recent weakness has not been devastating, losing just under 3%. However, the movement of $AAPL will have a large impact on the price action of the Nasdaq Composite and it’s still important to recognize the levels that could be important during either further weakness or another attempt at a rally.
Disclaimer: The information contained in this article should not be construed as investment advice, research, or an offer to buy or sell securities. Everything written here is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned.
