Nasdaq's Line Of Least Resistance On The Upside

Nasdaq, Weekly

Nasdaq futures are still trending higher in the weekly picture but the underlying index is trading close to the year 2000 highs. This makes the markets a bit hesitant. Futures moved to 4555.50 this week on Monday before dropping back to a previous resistance area over the last four days. Nasdaq futures are now trading roughly at the levels that used act as a resistance and should therefore be a support. The 4416 level is a weekly high from the beginning of April (more apparent in the daily picture) and is supporting price at the moment. Number of advancing stocks in the New York Stock Exchange is now at such low levels that in the past such levels have indicated higher prices for stocks over the coming few days.



Nasdaq, Daily

Price is reacting higher from ascending trendline and 50 day SMA. This is an encouraging sign that buyers are still interested in this market and ready to bid for it. When this happens at level that used to be a resistance area and there are several technical factors supporting price, the likelihood of market moving higher is better. Big technology stocks with heavy weighting in Nasdaq are also reacting higher. At the time of writing AAPL is by 0.61%, IBM 1.37%, MSFT being close to a resistance is up only 0.09%, FB 0.91% and ORCL 0.72%. This obviously supports the technical picture in the technology index. Index support and resistance levels are marked in the above chart.



Nasdaq, 240 min

In 4h picture Stochastics are turning higher after the price found support at the rising trend channel bottom. This is healthy after such a pullback and indicates the line of least resistance is on the upside. First support and resistance levels are at 4386.50 and 4471.75. The resistance coincides with 50% Fibonacci level adding more significance to the level. Should the current support get violated I am focusing on 4327 to 4350 pivot as potential buy area.
Conclusion

Market internals (number of advancing stocks) support the positive technical picture in Nasdaq. Price has moved to support levels after a few days decline and is now reacting higher. I look for a move to recent highs with the 4511 level acting as a target. The longer term picture is also strong even though the year 2000 high being so close warrants some carefulness. This carefulness should not however be a reason to buy when price action at support levels confirms bullish analysis. This view would be negated if there is no follow through and price stalls at current levels. That would be a sign to look for buy signals at lower levels.

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