The QQQs Better Hold This Support
- Posted by JC Parets
- on September 26th, 2012
From False Moves Come Fast Moves In The Opposite Direction
We can’t forget about this notion. It happens way too often. So when the potential setup appears, all these bells and whistles start going off in my head. And whether I’m acting on it or not, the idea itself either scares the hell out of me or makes my mouth water. I guess it depends on how we’re positioned at the time.
Today, I think we have a fairly clear line in the sand for the Nasdaq100 (or $QQQ) right around 67.50-68. I’m not saying the index gets crushed from here, but it sure as hell better hold on to those support levels. After getting up to this resistance at the end of March, the QQQs corrected a sharp 12% in just two months. Then in late August, we hung around this level for a couple of weeks and then broke out to new 12-year highs. But it’s gotta hang on:
Here’s what I see that makes me think: an RSI that did not make new highs when price just did. Take a look at the overbought readings back in February and March, and then look at the weak attempt during the recent “breakout” in price. On a shorter-term time frame, RSI made 3 consecutive lower highs over the last month as prices made 3 consecutive higher highs. That makes me uncomfortable.
So sure, prices could bounce off this support (former resistance) around 67.50-68 and go on to make new highs with RSI also confirming. In that case, “Remain calm, all is well” (as Kevin Bacon once said). But if it doesn’t, then this false move could turn into a fast move to the downside and it could get ugly. So at the very least, I think it’s definitely worth watching and respecting.
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association. More
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