- The downward trend channel is still holding strong as the price begins moving back into it.
- Fibonacci, Morningstar, RSI, and FREMA analyses all point toward bearish momentum.
- Potential targets bears could be targeting.
The downtrend channel is still a massive factor on the NQ chart. Even though we have seen the price break above the top line a few times, bears have been able to sell it right back into the zone. We are currently hovering around the June lows of $11,070. With NQ only 7% away from making a new lower low for the year, let’s take a look at some technicals that can assist in entry points and targets.
The Fibonacci retracements have acted as great levels on the chart to target and enter into positions. The price sold off 3 times after testing the 0.382 level (signaled with purple ticks). Two days ago, we saw NQ sell off toward the 0 Fib level, but the bulls proved to be a formidable force as the market bounced immediately after testing it.
Morning Star Pattern
After the price bounced off the Fib 0 level, there was a morning star pattern formation. The morning star candlestick pattern is a three-candle bullish reversal pattern that appears in a downtrend. The first candle is a long bearish candle, the second candle is a small-bodied candle, and the third is a bullish candle that closes near the top of the range of the first candle. The pattern is considered a bullish reversal because it indicates that the bulls have taken control of the market; however, due to both technical and fundamental factors at play at the moment, I don’t see this as a strong contender for a bullish reversal.
RSI Rolling Over
The RSI has crossed back below the 50 line, and so has its moving average. The nearest target we can go for is the RSI to touch the 30 oversold level. This does not give us a price target to aim for, but we can monitor price action as it moves toward that level, and if strong enough, the RSI has the potential to move into oversold territory, confirming the downtrend is well intact.
I applied the FREMA indicator to the 3 hourly charts, and all the ema bands are projecting downward. The indicator is based on fractals in its analysis, and we can look at the light green shaded area as a dynamic target for bears to target. If the price moves into that zone, it’s not particularly a signal to liquidate shorts but instead a sign to hold off on initiating new ones. As NQ moves below the black ema, we have a bearish trend, and based on our analysis above on the longer time frames, it could be a great trade to short as the price retraces back toward the black ema.
Targets & Levels To Watch
We need to consider the lows of the year as the most immediate target bears would be gunning for. The lows are at $11,067. If the price breaks below that, the FREMA indicator mentioned above would be able to provide us with dynamic targets moving downward, but a more stable target would be the midline of the downward channel. That is currently at around $9,700 on NQ.