Read This If You’re Planning To Go Long On Wednesday
Nasdaq
Drill Down
Hey Folks! After a small
“sabbatical†from the column, I’m back in action on the Tuesday/Thursday
time slot. I wanted to open up the new year with a look at the Nasdaq 100 on
the Weekly and Daily time frames. The message for me is quite simple: I’m
not a buyer at these levels on these time frames. I am tightening stops on long
positions that trade with the Nasdaq 100 and taking profits. I am also looking
for short swing trade opportunities, provided I get an entry opportunity. Why
do I say that? Let’s take a look…
First on the weekly chart
below:
src=”https://tradingmarkets.com/media/2004/Hobbs/dh010604-02.gif” />
Basically we are at a critical
Fibonacci price resistance zone. The previous two rallies were between 16 and
18 points. This rally from the 2002 low is just under 18 points. Note however,
that if QQQ clears the 41 area, it’s a quick trip to 44-45. For now the
focus zone is from 37-41.
Now that I see we’re
at higher time frame resistance, let’s drill down to a daily chart to
get an idea of when a reversal might take place. On the DAILY chart of QQQ below
you’ll see two patterns outlined.
src=”https://tradingmarkets.com/media/2004/Hobbs/dh010604-01.gif” />
These are both Bearish Butterfly
patterns that I use in my swing trading. This pattern is essentially a precursor
many times to the beginning of a reversal. In this case a potential downside
reversal. Also notice that these two patterns are bumping up against a daily
price resistance zone as well. Now, I just wait for a daily candle or combination
of candles to trigger me for a short trade. Or for long only traders…to
take profits after this extended up swing.
Again, now’s not the
time to be loading up on long positions in this area of the market if you’re
a daily swing trader. Rather, it would be time to take profits and to tighten
stops in the event of a quick sell off. And for you long/short traders, this
is prime time to be looking for short candidates. Later columns will identify
specific stock trades outside of this ETF that will address this QQQ situation.
Until next time!