The recovery on the Nasdaq 100 continued in Tuesday’s premarket trading as US markets record gains on renewed coronavirus containment optimism. The Nasdaq 100 futures are up 3.05% as at the time of writing, powered by positive moves from several pharmaceutical stocks. Vertex Pharmaceuticals is leading the charge in the biotech stocks with a gain of 7.13%. Chipmakers Micron and Nvidia are also doing very well, with Micron gaining nearly 13% and Nvidia rising by just above 10%.
Markets are betting on the data which show a reduction in the number of new cases and deaths in the hardest-hit countries, which may indicate that the tide may have turned in the fight against the coronavirus pandemic.
The price action from March 23, 2020, to the close of markets on Friday, April 4 can be seen to be a bullish flag acting as a market bottom pattern. The Nasdaq 100’s upsurge today has taken it above the 8015.5 resistance as well as the 8610.2 resistance level where the lows of December 3, 2019, and February 8, 2020, are nestled. This move confirms the breakout from the bullish flag. Further resistance lies at 8442.5, and if the Nasdaq 100 continues on its present trajectory of recovery, this target could be achieved this week. Attainment of this target completes the price projection from the breakout point of the bull flag formation. A move towards 8691.0 will depend on a decisive break of 8442.5 since that level had served as previous support that is now expected to act in role reversal.
On the flip side, 8015.5 remains the critical support to watch. If the Nasdaq 100 fails to break the 8610.2 resistance convincingly, we could see the index retreat towards the 8015.5 support area. If the Nasdaq 100 fails to find support here from further selling, the next target could be found at the 7834.6 price level. Only a drop below this level would challenge the flag component of the bull flag pattern. A further decline towards the 7241.2 price level invalidates the pattern and opens the door for further selloffs on the Nasdaq 100. Also, take note that the 8442.5 price level may represent point D in a XABCD harmonic pattern if price action from early March 2020 is taken into consideration. Confirmation of this pattern could have further bearish consequences and terminate price recovery at that price area.