Next Resistance For The NASDAQ 100 Shares

10/06/04 08:53:02 AM

by Kevin Hopson

The NASDAQ 100 shares have overcome several short-term obstacles.

Security: QQQ
Position: Hold

The NASDAQ 100 shares (QQQ) -- also called "the cubes" -- made a significant breakthrough last week when prices moved above the $36.00 level. Note how the top parallel line of the black pitchfork turned back prices in mid-September. Because the green median line and the 61.8% retracement level from the June to August decline also converged here, the $35.60 to $35.80 range acted as significant resistance for the cubes. In addition, the top parallel line of the blue pitchfork was coming into play here as well.

However, as you can see, the cubes gapped higher last Friday, clearing all three of these obstacles in the process. As a result, the short-term technicals point to higher prices in the near term. More specifically, January's downtrend line (red), which currently comes into play around the $37.30 level, appears to be the next upside target for the cubes. If you turn your attention to the other chart, you will see that long-term resistance is converging at slightly higher levels.

Figure 1: QQQ Resistance Lines

Graphic provided by: StockCharts.com.

For example, note how prices had been contained within the black pitchfork up until October of last year (2003). When prices moved outside of the pitchfork, another trendline was drawn. This channel line was configured by taking the distance from the median line of the pitchfork to one of the two parallel lines. After that, the number (distance) was added to the top parallel line. As you can see, the 1A channel line (dotted line) is coming into play around the $38.00 level. As a result, I would look for a potential upside target of $37.00 to $38.00 in the near term.

Figure 2: Trendlines

Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.