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A look at the Tech sell-off and thoughts on trading the NQ for Thursday, Nov 30th


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We sold off some in the Nasdaq today and there were signs of this sell-off from yesterday itself when the tech-heavy Nasdaq was very sluggish to follow along with the Dow or S&P which made new highs yesterday. That gradual and reluctant grind up by the Nasdaq futures (NQ) yesterday gave me the cue that we were in for a bit of a sell-off today if not a full-blown correction.

Daily Technical Analysis & Forecast

Up until yesterday, the main trend was up according to the daily chart, Im not sure I can say that anymore as we may see some continued weakness into tomorrow unless we see some value seekers grabbing on to the big names. Although the index was down over 1.27% today, I dont believe the red panic buttons are being reached for by the traders as the selling appeared more technical than anything else. On a month-on-month basis, we perhaps did a 50% Fib-retracement and hung in there today not taking out some levels which Id drawn on the sand to begin calling this something bigger than a technical sell-off.

The main range is from about 6230 to 6430 on a 200-point spread. The retracement area spans about 25 points between 6340 and 6310. We had some strong buying each time we tested that 6310 area where we cycled back into the 6330 area, however after profit takers from shorts exited, we saw the trend continue and blow past the 6300-handle but crest in the 6280-6290 area. Had we breached this on this sell-off and tested 6266, we couldve been in for a nice ride down as there is not much support below.

The new short-term range is 6430~6320 or about a 110-point spread. If value seekers start buying this up tomorrow or even early in the Globex session, I could see us rally back to somewhere between 6370~6390 and stall. In the Globex session ahead of Asian market open, we are trading at around 6308.25 having gone as high as 6311.25 and stopped. Earlier support areas in the 6330 will perhaps act as resistance for tomorrow and I do not see much possibility of the Globex session taking out this resistance. If we take out 6295, we may be in for a test of the cash session low for today (6283) and then on to 6265 zone easily. As I see this now, the financials which for most of the quarter lagged tech, has now moved ahead of the tech sector. A comparative ratio of the under lying ETFs can be used to benchmark this for those of you who are curious.

For tomorrow, a short covering rally could take us anywhere between 6370~6390. I am relatively sure we will run into a wall of resistance here and pull-back. Watch the price action around 6330~6340. If short-covering session catches steam we may head to that 20-point upper range I mentioned earlier.

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The Daily Chart for NQ

NQ Daily



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About the author


Murali Sarma, Vice President of Business Integrations Inc., is an internationally known commodities analyst, author, trader and business consultant who has demystified commodity trading and introduced numerous futures trading strategies and indicators to traders - professional, non-professional and the novice trader - throughout the world. Murali began his trading career in the pre-dot-com bubble in 1998, electing to seek instruments to trade which had lesser volatility and offered more predictable analysis. From about 1999 to 2002, Murali traded out of the UK and moving to the US after that and working mostly independently with individual traders while learning from some of the best analysts and traders. While not being formally certified as a commodities trader, Murali preferred to hone in on his analysis and trading skills versus adding academically to his credentials. Murali believes that is isn’t about being right or wrong on your calls, it is about making money!

Murali has helped several traders become successful over the last 10+ years of active futures trading and has a strong following of traders who like to seek out opportunities in the futures markets on a daily basis versus following the old “buy & hold” investing adage. While not being opposed to switching hats and becoming an “investor” every so often with swing trades in the equities markets, Murali prefers to trade what he can see on charts using multiple timeframes and handcrafted indicators suited for all types of markets. Murali excels in trading sideways and choppy markets with a scalping style of being in-out of intraday markets when there is no defined trend, and on most other days prefers trading to his own computed target levels during the intraday timeframe, while following the trend.

In recent months, Murali has started a Twitter based alert service for intraday futures traders who like to trade commodities and index futures, and elected to blog post his daily analysis in commodities like WTI Crude & Gold and index future instruments like YM, NQ, ES & RTY. You may contact him via his email at info@tradeguidance.com

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