Opportunities and Levels to Watch in NASDAQ and QQQQ June 16

Like the S&P 500, the NASDAQ Index faces a critical test of overhead resistance here – which will create an opportunity on a breakout or a ‘failure test’ (failure to rise above) at resistance.

Let’s see these levels as they exist currently on the NASDAQ and QQQQ:

There is a ‘final’ confluence resistance level in the NASDAQ at the 2,320 level that comes from two key levels to watch closely:

The declining 50 day EMA – a known reference level many traders watch – rests just above 2,300 (a nice “even” number).

Beyond that, the January “prior resistance” high is 2,325 – it may yet again hold as resistance.

However, any further bullish movement beyond these levels, above 2,350 perhaps, constitutes a breakout that triggers a quick “Popped Stops” and “Positive Feedback Loop” to the upside (bears cover, bulls buy).

We could see the index carry higher to 2,425 (May high) or – with extra gusto – the 2,500 level.

Looking beyond price, we have a distinct negative volume divergence which is a bearish non-confirmation – you would think bullish action/conviction would result in higher volume if we were angling for a breakout here… but so far volume declines as price rises – a classic warning/non-confirmation signal.

However, the 3/10 Momentum Oscillator has formed a clean positive divergence formation on the recent lows, which adds a bit to the bullish camp.

These conflicting signals – positive momentum divergence and negative volume divergence with price – muddy the waters a bit and should cause us to focus more on price levels as listed above for set-ups.

Let’s now move to the ETF – the QQQQ – to see price levels traders are using as reference levels:

The technical structure is identical to the Index, with the exception that – as of this writing – the QQQQ fund broke above the $46.50 reference level.

The January high rests just above $46.50 while the current declining 50 day EMA rests at $46.48.

Today’s high – and current price – is just beyond these levels.  If that continues to be the case, then we can look for a potential move to $48.50, and if buyers take the high ground there, then back to $50.50.

The other side of the coin – as I mentioned in yesterday’s S&P 500 post – is that this is a vicious “Bull Trap,” which we’ll suspect is the case if price falls back under these levels and starts to head down towards the prior support at the $43.50 level.

Stay vigilant and unbiased – and watch price developments as they occur.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade