Thursday's Market Minute: Faltering Nasdaq Breaching Potential Support

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The tech sector has stumbled in recent weeks as Nasdaq-100 futures have fallen about 7% from their yearly highs of 16,062.75 on July 19 to yesterday’s close. The weakness continued yesterday with a -1.14% drop that brought several notable developments from a technical perspective.

First, the /NQ closed below its 63-day Exponential Moving Average. This commonly followed indicator typically is regarded as support during uptrends, so a close below its current level near 14,950 is not necessarily what bulls want to see. Price is rebounding slightly in premarket trading and had climbed back above this line, so watch whether we get additional downside follow through today. Consider as well that the slope of the 63-EMA changed from sloping upward to sloping downward as of yesterday’s close, which is a potential warning sign for an uptrend.

Second, the /NQ also closed below trendline starting with the January lows and travelling up through the lows from March, April, and May. This trendline roughly lines up with the 63-EMA, and also happens to coincide with the yearly Linear Regression Line (a line of best fit based on closing prices and typically used as a measure of fair value for a financial product).

This support confluence between the 63-EMA, the trendline, and the Linear Regression Line could be a key price point to watch, so be aware of any close below roughly 14,950. Beyond that, look to the previous highs near 14,600 for potential support. For resistance, the 21-day Exponential Moving Average will be a potential ceiling for the time being and comes in near 15,314.

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