Nasdaq Drilldown
From my previous
column, we discuss the completion of a bearish Butterfly pattern
on this daily chart of QQQ below. Over the last three trading sessions we have
tested the November 2002 high and put in three prominent candlesticks that
“tailed†up into resistance and backed off. Is this an early indication for
a corrective move in QQQ? Today we got confirmation that it might be as the 30
Year Treasury Futures
(
USM3 |
Quote |
Chart |
News |
PowerRating) broke the Bearish Gartley pattern and is
likely to run up to new highs.
Now, a method I use to see if a trend is in the process of
breaking down and shifting into “correction mode†is called Symmetry
Violation. If you pull up a 30 or 60 minute chart of (QQQ) or the E-Mini
Contract
(
NQM3 |
Quote |
Chart |
News |
PowerRating) you’ll see a nice steady uptrend with small symmetrical
pullbacks. On the 60 minute chart of QQQ below there is a focus support zone
from 27.40-28.00. This zone includes 4 symmetry levels. A symmetry level is
created by taking a previous corrective decline and subtract that range value
from the current swing high point to come up with a symmetrical or similar
corrective move where this ETF might reverse back to the upside. All of the
symmetry levels on QQQ come in between 27.80 and 28.00. Bottom line on the 60
minute chart below….if this support zone is broken it will be an early
indication that we are likely in for a longer and deeper corrective move before
moving higher.
 
Now, for you E-Mini traders we can see the same dynamic
unfolding. We have a support zone from 1119 to 1132 that I am focusing on. The
previous two declines were right around 35 points. We are currently at 31 points
in this decline. Right now, this sure looks like a good long trade opportunity
(simply looking at the chart below). We have a two step pattern into support,
with the trend, symmetry, and a nice confluence of support levels. If long
trades are initiated against this zone I would be sure to keep a tight stop just
below this support zone. Why? If this support zone is violated that includes
these symmetry levels the higher time frame bearish patterns are unfolding and
like I said earlier….this contract is likely to go into a deeper corrective
move.
 
Good night,
P.S. WFMI is down over 9 pts in after hours trading…check
out a weekly chart of this one. It completed a Bearish Butterfly pattern right
before this drop. Yes…I’m doing some Monday morning quarterbacking here and
I didn’t catch this one personally. The point is to keep your eye out for
these patterns.