NDX update end of 09 Oct 2024

Price bounced up at the bottom ban of the channel. Bear flag not activated yet.

Nasdaq Forecast: Key Levels to Watch as Bear Flag Forms / Previously published on Oct 08

The Nasdaq 100 (NDX) is currently showing signs of a potential breakdown from its ascending channel, a pattern commonly associated with bearish price movement. As traders and investors closely monitor this development, understanding the technical setup and market drivers is essential. Below, we highlight the key factors influencing the market and what to expect moving forward.

Bear flag pattern on NDX: A potential warning sign... If the price breaks down today 📉

A bear flag pattern has emerged on the hourly chart of the Nasdaq 100, a formation that signals possible continued weakness. This pattern typically suggests that a breakdown could extend the prior downward trend, which many market participants have been tracking closely.

• Key levels: The channel’s lower boundary is being tested around the 19,800 level, a critical support zone. A confirmed breakdown here could signal more downside ahead.

Experience insight:

From my experience trading the Nasdaq, bear flag formations are particularly important to watch during periods of uncertainty. Even bitcoin may signal the existance of this uncertainty, along with other pre-election polls. Yes, even on the hourly chart such as the above. True, you could get a higher level of confirmation if price breaks down a bear flag on the 4 hourly or daily chart, but then, your entry might be a little late.

Remember, we are here looking at NDX and not NQ nasdaq futures. So, when the US market opens, NDX will reflect the NQ move of today, till that open. There will be plenty of new information there - is the price bouncing up from that lower band, has it crossed down, etc. It is best to wait and see what NDX is doing, even 1 hour into the standard trading hours, rather than jumping into a trade.

On NQ, there is a potential resistance at 20150 and 20190. Watch if NQ gets there and how price reacts.

Key Levels to Monitor 🔍

Bearish momentum and potential breakdown:

• Bearish momentum: Failure to hold support at the lower end of the channel may activate the bear flag, indicating a bearish continuation toward the next support zone near 19,200. This will most likely not happen in 1 day, but this could be a multi-day swing short target.

Expertise in action:

Technically, once a bear flag forms, the market tends to break down swiftly if momentum increases. For traders, monitoring the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) will be crucial to gauge any building momentum. A declining RSI below 40 can indicate growing bearish sentiment. Also, you may want to wait for a retest on the lower band of the channel rather than entering with FOMO when you see the 1st breakout down.

Confirmation Needed:

• Breakdown confirmation: Traders will look for a decisive close below the channel support, preferably with an increase in selling volume, to confirm the bear flag breakdown. Without this confirmation, a bounce within the channel could negate the bearish outlook.

Upside Risks:

• Potential bounce: Should the NDX bounce instead, which is less likely today due to the price action of the Nasdaq futures, but not impossible since we can still have a bearish fakeout, then resistance for the next 2 days - starting 08 Oct 2024, around the 20,055 level may be retested. On the longer timeline, the upper boundary of the channel would likely act as a resistance cap for any outstaning bullish move, keeping the bearish scenario alive unless broken convincingly.

Nasdaq forecast: What to Watch 👀

• 19,800 support: The key level to watch for a breakdown. Historically, breaks below similar trendline supports have triggered significant downside moves.

• Volume surge: A significant increase in trading volume during a break of support would act as confirmation for the bear flag pattern. Without increased volume, the pattern's validity weakens.

• Next target, should breakdown happen, watch for this today: If the breakdown occurs, the next target could be around 19,200.

• Technical indicators: Watch indicators such as RSI and MACD for signs of increasing bearish momentum. A falling RSI combined with a bearish MACD crossover could serve as a strong signal for further declines.

Final Thoughts 💡

Bull and bear flags are popular price patterns recognised in technical analysis and the chart above for NDX shows we may have one on the 1hr chart. Traders should keep a close eye on this technical setup. A confirmed breakdown could push the Nasdaq 100 into a more bearish stance, creating opportunities for short sellers. On the other hand, a bounce within the channel could offer temporary reprieve, but any long position should be approached cautiously, given the broader market weakness. Watch this important technical junction today, as algos may come in and trigger selling. As always, trade NDX at your own risk and visit ForexLive.com for additional views.