E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Technical Bounce Could Lead to Test of 11803.75

September E-mini NASDAQ-100 Index futures extended losses on Friday after plunging in the previous session as technology stocks sold off again, overshadowing data showing a steeper-than-expected drop in the unemployment rate in August.

At the mid-session, the tech-heavy market is down nearly 5% as mega-cap companies Apple, Inc, Microsoft Inc, Amazon.com Inc, Tesla Inc and Nvidia Inc plummeted.

At 15:40 GMT, September E-mini NASDAQ-100 Index futures are trading 11394.75, down 405.75 or -3.44%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. The main trend will change to down on a trade through the nearest main bottom at 10845.50. A move through 12465.25 will signal a resumption of the downtrend.

The market is still in the correction phase with anyone of a number of 50% to 61.8% retracement zones potential downside targets.

The first short-term range is 10845.50 to 12465.25. Its 50% level comes in at 11655.50. Today’s sell-off essentially began when this level failed as support. This level is now new resistance.

The second short-term range that we consider important is 10301.00 to 12465.25. Its retracement zone at 11383.25 to 11127.75 is currently being tested.

The third short-term range is 9368.25 to 12465.25. Its retracement zone at 10916.75 to 10551.25 is considered important support because it encompasses the last main bottom at 10845.50.

Short-term Outlook

Momentum took the market up, now momentum is taking it down. Despite the steep two day plunge, the main trend remains up.

The first leg down from a major top is usually caused by profit-taking. There is no time frame attached to this move, but it usually stops when prices have reached a value zone, or an area attractive to new buyers. We think that zone is 10916.75 to 10551.25. We’re going to look for a technical bounce on the first test of this area.

Traders should also watch for the snapback rally. Right now, the first leg down from the main top is 12465.25 to 11142.00. If today’s intraday technical bounce continues then look for a rally back to its 50% level at 11803.75.

A rally back to 11803.75 would be a normal move. However, trader reaction to this level could determine the near-term direction of the index. Aggressive counter-trend sellers are likely to come in on a test of 11803.75. They are going to try to form a secondary lower top, which is usually the first sign of shorting.

Buyers are going to try to take out 11803.75 in an effort to extend the trend. This would make 11142.00 the new swing bottom.

Traders should also note that the trade could get choppy and two-sided because of the number of retracement levels in play.