Kent Shaw's DiNapoli Analysis of the Mini-NASDAQ 100 (MNX)

All discussion is based on methods created by Joe DiNapoli that are covered extensively in his book, Trading With DiNapoli Levels.

Long Term View of the Mini-NASDAQ 100 (MNX)

Major support (in yellow) is at 158-159. Fibonacci retracement levels can be drawn from every swing low to the recent high (Focus point) but I only kept the levels that created Confluence (K), a clustering of different Fibonacci retracements. In DiNapoli Level analysis, only the 61.8% and 38.2% retracement levels are used.

Short Term View of the Mini-NASDAQ 100 (MNX)

These retracement levels are drawn from the most recent high. When another new relative high is made they will need to be recalculated. I usually don't calculate short term retracements until price has pulled back from the current trend for 3-4 days but wanted to show a current example. The shorter term retracements are drawn from a Thrust, a bar with larger than average range that opens and closes near its extremes. Another difference in DiNapoli Level analysis is the use of Thrusts and Gaps as points to begin calculating retracements.

Projected Resistance Levels for the MNX

One of the most important parts of D-Level analysis is calculating Logical Profit Objectives (LPOs). LPO's fall into three categories: Contracted Objective Profit (COP), Objective Profit (OP), and Extended Objective Profit (XOP). In my limited experience, the OP is reached in all but the weakest of moves. That level may or may not act as resistance but if you are trading directionally it will give you a reasonable target that you can shoot for with some confidence. The XOP is reached less often and there is usually a quick retracement once it is reached. The ability of a market to reach various types of LPOs also tells you something about that market's character. If OPs are easily hit and an XOP on the upside is hit for the first time in a while the market may be changing character from a range bound or bearish tone to a bullish tone. I don't use LPOs as much as a should (mostly a time constraint for me right now) but when I do it helps tremendously.

Anyone can get into a trade -- that's the easy part -- but it's the exiting that separates the pros from the amateurs. When I have used LPOs diligently, I've given up very little if any profit from a good trade and I trade with greater confidence because I have an idea where I will exit. The other benefit of using LPOs is that you can generally exit into strength which means you get much better fills and possibly even positive slippage. That's my favorite kind of slippage :)

The LPOs listed below are for the same swing that is shown in the Short Term View above.

The large chart below shows a much longer term projection with the LPOs included in a box overlaid on the chart. An interesting thing to note is that the OP for the Long Term View is only 0.14 away from the OP of the Short Term View. This would be another form of Confluence (K) formed by multiple LPOs rather than multiple retracements. It's also possible to have Confluence created by a combination of LPOs and Fib nodes, or retracement levels. The bars in the chart below are monthly bars but the swing points would be apparent in a weekly chart as well. Price has already penetrated both of these levels but not by much and when the level was first penetrated a pullback of 8-10 points occurred.

I'm not suggesting that anyone short the MNX at these levels. I always use several confirming indicators and volume analysis before I take counter-trend trades but it is important to note that we are at or near several areas of resistance right now. Please post questions if you have them and I'll try to get to them when I can. Life is especially hectic at the moment.

-Kent Shaw

Additional Resources

DiNapoli Levels – Explanation And Example
Kent Shaw explains how to calculate DiNapoli
levels and explains their significance

Fibonacci Trading Course
Money Management, Trend Analysis & Trading with
DiNapoli Levels.

Technical Analysis of the Financial Markets
How to read charts to understanding indicators and
the crucial role of technical analysis in investing.