We Nailed 3830 in the NQ

Buyers defend key support at 3830, sparking a significant two-day rally. But will price continue higher?

Buyers Defend 3830

Four weeks ago I wrote analysis for the E-Mini NASDAQ 100 [NQU14: CME] futures (NASDAQ 100 Headed for 4055) wherein I offer, “Keep an eye on 3920 for early directional cues this week. Responsive sellers will be looking to take 3920 offered for a shot at 3830…a drop into 3830, or even 3790 and 3745, is likely to be defended by responsive buyers, as these levels were bid the last time the market traded there. Again, pullbacks should be seen as buying opportunities until proven otherwise.”

Our 3830 key level came up huge in the NQ, as price rallied more than 90 points off this level the last two sessions, easily gaining back half of what it lost over the last few weeks. Higher timeframe buyers stepped in to defend 3830 yet again, which is the second instance in the last five weeks. As a matter of fact, this has led to the development of a solid low volume node (LVN) in the composite profile precisely at 3830, which has become a great support level for the bulls.

Watch 3871.75 to 3991.50

With the second defense of 3830, a new key range has materialized from 3831.75 to 3991.50, with a midpoint at 3911.50. These are the key levels to watch as buyers and sellers jockey for position in the days and weeks ahead. While buyers successfully defended the bottom of the range at 3830, responsive sellers are beginning to defend the midpoint of the range at 3911.50, which is their second such defense in the last two weeks.

As I mentioned before, the overall bull trend is still intact. If buyers can run the upside buy stops through 3940, we could see expansion down the road that ultimately takes price to 4071.25 and 4151.25, as these are the 50% and 100% expansion targets of the current range. However, keep in mind that this newly-formed range could continue to develop for several more weeks before expansion is seen.

Sellers on Deck

Responsive sellers believe they’re working on a head-and-shoulders pattern, with the top of the right shoulder at 3930 to 3940. This is the key zone of resistance the bears are watching, as they will attempt to defend prior support and turn it to resistance here. Short term, we could see selling pressure away from this zone, which could lead to a retest of 3830, and perhaps lower.

If sellers successfully take price offered through the LVN at 3830, a rush of sell stops could lead price into the downside expansion targets at 3751.25 and 3672. If this scenario plays out, look for buyers to defend 3790 and 3745.

Cheers!

Frank Ochoa

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