Balancing Act In The QQQ

12/18/01 10:35:33 AM

by Austin Passamonte

As the Nasdaq 100 Index gets ready to replace some of its poor performers with new prospects, where is it positioned, technically speaking?

Security: QQQ
Position: N/A

December 24th marks the annual Nasdaq 100 rebalancing act. Out with the old duds and in with current hot prospects. This periodic flushing keeps the index stoked with recent performers while shedding laggards out. While designed to keep the index vibrant & strong, is that enough to keep price action moving higher from here?

NDX is still riding its historical channel down even though the trend for three months has been up. The first sign of that channel breaking (light blue lines) came last week and may not be able to climb too much higher towards overhead resistance above unless it does so soon.

Figure 1: Weekly Chart: NDX

Graphic provided by: Quote.com.

Graphic provided by: QCharts.

Also, the NDX entered bear confirmed status in point & figure charting last week in harmony with what we see in its charts.

Figure 2: Daily Chart: QQQ

This is the same exact chart, time frame switched to daily. Stochastic values are bearish in techs and that three-month channel just failed. It could easily pop higher and reenter the ascent this week, but new measures of overhead resistance fell in place when price action broke down.

Figure 3: Daily P&F Chart: QQQ
Graphics Courtesy of Stockcharts.com

The 40.00 level for QQQ symbol is a relatively important downward trendline of support. So far it has held and needs to do so if upward action has a chance from here. The 35.00 area is the next strong support backed up by 34 area from there. We see where the growing wedge broke with four Xs up but then promptly pulled back when giving up three Os after that.

An upward reversal using 40.00 area as a pivot is most likely, but break below 39.00 would have traders looking toward the mid 30s for support from there. Will rebalancing with biotechs swapped for ragged telecom issues thwart recent weakness? Don't know for sure, but our trusty charts will surely tell!

Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title:	Individual Trader
Company:	CoiledMarkets.com
Address:	PO Box 633
	Naples, NY 14512
Website:	coiledmarkets.com/blog
E-mail address:	austinp44@yahoo.com
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