Nasdaq Futures Rise but Road Ahead Could Be More Bumpy
2024.11.28 08:37
- Nasdaq futures test key support levels, with bulls holding the trend line since August.
- Traders eye resistance near July highs as potential catalyst for the next big move.
- Nvidia’s performance could set the tone for tech stocks when markets reopen.
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With US cash equity markets closed in observance of Thanksgiving, rose in the first half of Thursday’s session, tracking a firmer European and Japanese markets. In Europe, the major indices were up around 0.5% or so, snapping a two-day decline. Technology stocks led the gains.
Bloomberg reported that the additional restrictions the US is considering on selling semiconductor equipment and AI memory chips to China would not go as far as some of the stricter measures previously contemplated. However, with the lack of any other major catalysts, I don’t expect to see significant gains from here, without first witnessing a correction of some sort.
US markets could be more subdued amid lack of fresh catalysts
The contrast between US markets and the rest of the world, particularly China, has been striking for much of this year. US investors anticipate a business-friendly president to drive growth in 2025, while trade tariffs and protectionist policies are viewed as headwinds for Chinese markets and, to a lesser extent, the Eurozone.
But with much of the “Trump trade” already factored in, US markets may find it challenging to achieve substantial further gains. However, without a clear technical reversal pattern on the charts, I would refrain from acting on my cautious outlook just yet.
Nasdaq technical analysis and trade ideas
Indeed, the technical picture on the Nasdaq remains bullish for now, even if momentum has been lost somewhat in recent days. Until we see the breakdown in the market structure of higher highs and higher lows, there is little point trying to fight the trend.
That being said, we can prepare ourselves for a potential market reversal, in the event some risk-off stimulus comes into play. I will also highlight some bullish targets in case the rally keeps going.
The key area of support was tested on Wednesday and was being tested again at the time of writing at around 20,800 on the Nasdaq futures chart. This is where the 21-day exponential moving average converges with the bullish trend line that has been in place since markets bottomed in August. As a minimum, the bears would need to see the breakdown of this trend line on a daily closing basis before turning bearish.
The next level of support below this area comes in at around 20,385, a level that has already been tested and is where the post-election rally began. Therefore, if the market were to go below this area, this would mark a psychological blow for the bulls who bought on the notion that Trump’s policies will help to boost the stock markets. The line in the sand for me is at 20,020.
This level is a pivotal zone, where previously the market had found both resistance and support on multiple occasions. It is also the low made prior to the election-related rally. Therefore, should we see a breakdown below this level, then at that point we will have created a lower low and thus a confirmation that the market may have formed at least a temporary peak.
In terms of key resistance levels to watch, well there are not too many on that front. The July high comes in at 20,983. We broke above this level after the US presidential election, but despite spending a few days above it, the breakout ultimately failed to hold, leading to that sharp sell-off on Friday November 15, as stops were taken out.
But during much of last week and early parts of this week, the market stabilized and we made back a good chunk of the losses since markets peaked earlier this month. Still, we haven’t seen a decisive break back above that July high and for as long that remains the case, a higher degree of caution is warranted.
However, if we do see the bulls recapture the July high then that could initiate another move higher. Above there, there’s nothing significant until the all-time high of 21,340, and then it’s all uncharted territories above that. An extended bullish target is at 21,971, marking the 127.2% Fibonacci extension level of the drop that took place in July.
Stock to watch: Nvidia
Among individual names to watch when cash markets re-open on Friday is NVIDIA Corporation (NASDAQ:).
The chipmaker closed below the breakout area of 140 after faking out at 150. The break of the short-term bullish trend line and 21-day exponential moving average are additional signs of concern for the bulls. Is this a possible correction phase in the making? If so, it could add pressure on the tech-heavy .
As always, it is all about follow-through. Every time we have seen a bit of downward move, the dip has been quickly bought. So, let’s see if more selling will resume on Friday, before jumping into any conclusions.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.
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