Make Sure Your Charts Are Following The Same ‘Script’ … Here’s How

There are three different “scripts” that the markets convey on any
given time period:

Bull Script (don’t say that one too fast…hee hee)

Bear Script

Weiner Dog Script (sideways)

In my trading I try to find a scenario where the time frame that I’m trading
on and one time frame higher is setting up on the same script. The different levels
of time frames from my perspective are: 5 min, 15 min, 30 min, 60 min, Daily,
Weekly, Monthly.

So, if I’m trading the daily chart and have a Bullish set up, it would be
ideal to turn to the weekly chart and read a Bullish script to confirm my potential
trade. The Nasdaq 100 Tracking Stock (QQQ) is experiencing this as I type.

On the daily chart below, (QQQ) is hitting a large Fibonacci price support zone
from 31 to 33. It is an extension zone, which is the 1.272 to 1.618 area
of the previous major swing low to high. Not only that, but I have a time symmetry
situation to deal with. The previous rally from May 17, 2004 to June 30, 2004
was 30 trading days. From June 30, 2004 to August 12, 2004 we are now at 30 trading
days. So, from my point of view, this is definitely a “Bullish Script”.

Now to give this set up a higher confidence level, I would like to find
the weekly chart to be in a bullish position. I would definitely NOT want to turn
to the weekly chart to find a Bearish Gartley or Bearish Butterfly pattern, or
that this ETF is hitting up against major Fibonacci price weekly resistance. If
that were the case I would most likely not take the daily set up/trade. So, let’s
take a peak at the weekly “script”:

^next^

The weekly factors are as follows: (QQQ) is hitting a large price support
zone at the same time completing a symmetrical two step pattern. Add to this,
the fact that the previous two declines since October 2002 were between 5.5 and
6.5 points. This decline is now at 6.5 points. So, we have a pattern, symmetry,
and price support lined up on the weekly time frame to give me a confirming Bullish
Script.

Right now, I’m interested in buying (QQQ) above 33.50 with a stop below
the lowest price level on the daily price support zone of 31.30. Specifically
my stop would be at 30.87. So call it a 10% risk set up.

Bottom line: Nasdaq is reading from the same script on the daily and weekly time
frame, and it is definitely not an ideal time to be considering taking or adding
short swing positions on this index at these levels.

Now, excuse me while I go rehearse this script. It looks like ACT 2 could get
very interesting for the Bulls!