E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Next Downside Target Zone 9344.25 to 9245.50

March E-mini NASDAQ-100 Index futures settled sharply lower on Friday as a spike in new coronavirus cases in China and elsewhere sent investors scrambling for safer assets such as gold and government bonds. The cash market NASDAQ Composite recorded its worst session since January 27, while posting its first loss in three weeks.

On Friday, March E-mini NASDAQ-100 Index futures closed at 9458.00, down 166.25 or -1.76%.

Microsoft fell more than 3% to lead the Dow lower on Friday. Facebook, Amazon, Netflix, Google-parent Alphabet and Apple all closed at least 1.5% lower to drag the technology sector in the other major indexes and the NASDAQ lower.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, momentum shifted to the downside with the formation of the closing price reversal top on Thursday and its subsequent confirmation on Friday.

A trade through 9763.00 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through a pair of main bottoms at 8966.00 and 8925.50.

The minor trend is down. This move confirms the shift in momentum to down.

The main range is 8925.50 to 9763.00. Its retracement zone at 9344.25 to 9245.50 is the next downside target. Since the main trend is up, buyers could step in on a test of this area.

Short-Term Outlook

The closing price reversal top and its subsequent confirmation led to a shift in momentum to the downside. This chart pattern does not change the main trend to down. It usually leads to a 2 to 3 day counter-trend move of about 50% to 61.8%, which means were likely to see a further break into the retracement zone at 9344.25 to 9245.50.

The first leg down from any major top is usually triggered by long liquidation. This is usually followed by a rally equal to 50% to 61.8% of the first leg down. Trader reaction to this retracement zone will tell us if the index is headed lower or higher.

If it’s headed higher then buyers will take out the high end of the retracement zone. If it is headed lower then aggressive counter-trend sellers will come in to stop the rally. Their job is to create a secondary lower top.

In the professional world, traders short when they have a previous top to lean on. They don’t try to pick tops to short. Maybe to exit long positions, but not to short. So before we can call this chart pattern a major top, we’re going to need to see the formation of a secondary lower top.