After an impressive year-to-date rally in the technology sector that saw the Nasdaq 100 futures (CME: NQ) trading almost 40% higher, the market faces a stiff test as the latest quarterly earnings reports flood in. With Tesla and Netflix being the first culprits of disappointing earnings, the futures look exhausted at the top of the uptrend.
On Thursday, the futures slumped by 2.30%, weighed down by the earnings reports from Tesla and Netflix, as Elon Mush hinted at more price cuts to come, while Netflix missed on top-line estimates and provided conservative guidance. If these results indicate what’s to come, the futures could be vulnerable, as it’s on its way to closing the week in the red.
On the 4H chart, the earnings reaction sparked a breakdown from the ascending channel, with the price action shifting lower than the daily pivot point at 15,688.25, which now acts as resistance along with the 50-day moving average.
If the current momentum persists, a breakdown at 15,451.00 could confirm the sustainability of the channel break, with lower support established at 15,243.00 and 15,017.00.
However, a short-term correction that breaks through the pivot point could reverse the trend toward 15,829.75 to retest the channel support. An additional breakout could then signal a continuation of the prior uptrend, where resistance has formed at 15,957.00 and 16,067.00.
Despite its lucrative rally in the year’s opening months, the Nasdaq 100 futures stands before a highly anticipated earnings season. With the initial reports weighing down on the futures, the price action could be under pressure as we advance. If the pivot resistance at 15,688.25 holds, the momentum could continue toward 15,451.00. Conversely, a breakout at the pivot could boost the futures toward resistance at 15,829.75.
Sources: Koyfin, Tradingview
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