Welcome to Chart Chatter where we discuss various technical charts we find of interest. We cover indices, signals and stocks on different timeframes highlighting different technical techniques we use over time. We’ll focus on key observations we find relevant which readers may find of use for their own trading.
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Below is a trend line analysis of $NDX using daily charts. Trend lines are relevant until they are invalidated and can give traders an entry edge in defining support and resistance.
Since the March/April time frame $NDX has been building a rather precise channel of higher highs and lower highs:
Notable is that the August highs did not quite tag the upper channel and last week’s pullback has broken this recent channel to the downside. The lower channel has been tagged over a dozen times as support previously and has produced tradable rallies from this trend line.
Typically a confirmed break of lower trend line support would suggest further downside risk.
However $NDX trend line analysis can also be viewed on a longer term time frame and here an additional dimension can define the current price zone as support:
Note the current trend line proximity offered resistance in 2017 until it finally broke above in January 2018. The February 2018 correction appeared to break this trend line for good before finding support at the 3rd trend line. The trend line became resistance again in April and May, but has re-established itself as support again.
Given the frequency of tags of this trend line it is to be viewed with some caution in terms of its going forward reliability. However as of this writing it still offers support and may produce a rally.
Should price break this key trend line in context of the earlier chart downside risk into the next lower trend line opens up.
Bottomline: Bulls need to recapture the trend line in chart 1 and avoid a break of the support trend line in chart 2.
Interesting battle for control here. The channel trend line remains broken and has been retested twice now and has offered resistance.
On the support side the $NDX has found support confluence on the 50MA and the .382 fib (tagged 4 times) and as of this writing price is smack in the middle between these 2 key price pivots.
Confirmed break above the trend line will bring a rally, break below the 50MA will target the lower fib and perhaps the .618 fib/100MA confluence.
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