The Nasdaq 100 (QQQ) continues to show a weak hand. Riddled with tech companies that are selling off, it has struggled to hold over its 50-day moving average at $381.02.
Having said that, the QQQ is one of the most important indices to watch right now, as its current support level is pivotal to the overall equity market's strength. This is because the Nasdaq 100 has had one of the strongest rallies through the pandemic and, therefore, if the QQQ continues to head lower, it could drag down other sectors with underlying weakness.
The Nasdaq's main support area is $379-381 from the recent low to the 50-DMA. Ever since the QQQ broke its neckline area from a head-and-shoulders chart pattern at $387.53, it has been very volatile. Now, QQQ has a fair amount of overhead resistance to get through because of this pattern.
First, it will need to clear back through the neckline area at 387, then through the shoulder line at $401.19. These resistance levels can be seen as a black line on the above chart. With that said, the resistance levels could be very tough to clear, as certain stocks within the index, like Netflix (NFLX), Zoom (ZM), Nvidia (NVDA) and more, have sustained large price drops recently.
While the index itself is holding, the internal struggle through heavy-weighted tech companies will need to battle their way back up. Therefore, keep these support and resistance levels in mind through this trading week; however, if the QQQ continues its internal struggle with large tech companies selling off, expect the index to stay choppy and potentially rangebound.
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- S&P 500 (SPY): 449 support.
- Russell 2000 (IWM): 212 support area.
- Dow (DIA): Watch to clear and hold over the 50-DMA at 353.04.
- Nasdaq (QQQ): 379 support from recent lows.
- KRE (Regional Banks): Needs to clear and hold over 10-DMA at 71.84.
- SMH (Semiconductors): Major pullback into support area. Needs to hold over 297.
- IYT (Transportation): Will confirm a bullish phase with second close over the 50-DMA at 264.82.
- IBB (Biotechnology): With its continued breakdown, it needs to find support.
- XRT (Retail): 93.59 needs to clear.
Assistant Director of Trading Research and Education