The overall market sentiment appears cautiously optimistic, with profit-taking evident in technology stocks, particularly chipmakers, after a strong run. While profiting-taking weighed on tech stocks in the previous session, the Nasdaq 100 Index (CME: NQ) managed small gains on Thursday.
Investors are looking ahead to key economic data releases this week, including producer price data (PPI) and jobless claims, for clues on inflation and the Federal Reserve’s monetary policy stance. A hotter-than-expected PPI could dampen hopes of rate cuts in the coming months, potentially pressuring growth-oriented technology stocks.
However, some optimism persists as Tuesday’s consumer price data, though slightly higher, did not deter hopes for an easing cycle. The upcoming Nvidia GTC developer conference could reignite interest in the technology sector, with positive AI-related announcements potentially boosting the index.
Technical Analysis
The index is currently trading within a rising wedge pattern on the 4-hour chart. This pattern can be interpreted in two ways: a continuation pattern or a reversal pattern. With the recent support from the 20-SMA, a potential for a push high could exist, with the 18,499.00 price level likely to act as a significant level in the short term. Short-term trading opportunities towards the all-time high of 18691.25 price level could exist should the price action sustain a break above the 18,499.00 price level.
Supporting the bullish case is the price action trading above all three key moving averages [20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line)] with a positive slope. Additionally, the RSI (Relative Strength Index) at 56.88 is hovering comfortably above the 50.00 level.
However, a break below the 23.60% Fibonacci retracement level (18,129.75) could signal a potential reversal and a test of the 38.20% level (17,783.00). A sustained move below this level would expose the 50.00% (17,956.50) and 61.80% (17,783.00) Fibonacci retracement levels.
Summary
The short-term outlook for the Nasdaq 100 Index hinges on its ability to sustain the breakout above the rising wedge pattern. A confirmed breakout could lead to a test of the all-time high. Conversely, a breakdown below the 23.60% Fibonacci retracement level could trigger a decline towards the 38.20% level or lower.
Sources: TradingView, Trading Economics, Office for National Statistics, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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