The Nasdaq 100 Index has seen a strong rally from April through early June 2025, buoyed by optimism surrounding US-China trade negotiations. This positive sentiment was reinforced by US President Donald Trump’s extension of tariff deadlines and indications of potential trade deals with other countries, such as India. Since its April lows, the index has gained approximately 32 per cent, largely driven by strong performances in the technology sector.
However, recent market volatility has emerged due to various factors, most notably a public dispute between t Trump and Tesla CEO Elon Musk on Jun 5. This disagreement led to a significant drop in Tesla’s stock and weighed on broader market indices and investor confidence.
Technical analysis
The Nasdaq 100 has maintained its bullish trajectory, with the 20-day, 50-day, and 200-day Simple Moving Averages (SMA) acting as strong support levels. In May 2025, a bullish crossover occurred, where the 20-day SMA moved above both the 50-day and 200-day SMAs, signalling continued upward momentum.
The index is now approaching a key resistance level at 22,220, which corresponds with the 100 per cent Fibonacci retracement and the February 2025 high. Support levels are identified at 20,880 and 20,050, aligned with the 78.6 per cent and 61.8 per cent Fibonacci retracement levels, respectively.
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Bullish scenario
If the Nasdaq 100 sustains its position above the 20-day SMA and breaks decisively through the 22,220-resistance level, it could pave the way for further gains and fresh all-time highs. Positive developments in trade negotiations and continued strength in the technology sector would reinforce this bullish outlook. In such a scenario, psychological resistance levels of 23,000 and 24,000 may come into focus.
Bearish scenario
Despite the prevailing uptrend, caution is warranted. A bearish divergence has emerged between the index’s performance and the Relative Strength Index (RSI). While the Nasdaq 100 has reached new highs, the RSI has formed lower highs from mid-May to early June 2025, indicating potential weakening momentum.
Should the index fail to break above the 22,220 resistance and fall below the 21,000-support level, a deeper correction towards the 20,000 level could follow. Beyond the two Fibonacci support levels, investors can also use the 20-day and 50-day SMA lines as dynamic support indicators. Factors such as renewed trade tensions or disappointing economic data could exacerbate this downside risk.
Conclusion
The Nasdaq 100 continues to exhibit strong bullish momentum, underpinned by positive trade developments and supportive technical indicators. However, the observed RSI divergence and recent market volatility highlight the need for investor vigilance. Traders and investors should monitor key support and resistance levels, along with macroeconomic indicators and trade-related developments, especially with most tariff extensions ending in July.
The writer is manager, dealing & investor education, at PhillipCapital
