Nasdaq Index Set-Up
Buy the dip and sell the rip
- The Rare condition of gaps in the futures markets
- The Targeted Level was hit
- Consolidations in Bear Markets
- Trend Resumption
What you see toward the right edge of the chart are two gaps shaded in the yellow ovals, they mark points of imbalance where price will have a tendency of filling (we have back-tested this idea numerous times) it is something to expect from the not as liquid nature of common stocks but futures have proven to fill more often and in most cases in the same day
The arrow on the left edge shows the point of pain where price jumped into 6612 before cratering and resuming the trend of lower lows. This was nearly the exact same point where buyers showed temporary exhaustion and were not able to keep bidding.
In trending markets bears or in our case the dominant sellers must pause before they can make the next move, and that is a consolidation between 6440-6600 its a wide and loose base (for these conditions entering May we would say building a top between both points at 6600-6615
This is the kind of stalling that we would expect before a charge toward yearly lows and whatever unexpected news comes down the pipeline. Also on a side note, the yield on government bonds is creating a fundamental headwind making stocks less attractive, so the psychological element of increase pessimism makes it hard for the buyers to show as much enthusiasm on good news releases as they used to in recent quarters.
We should look-over this chart after the set up has either fulfilled its goal of coming down 400-500 points or see why it would have been invalidated technically....
Thank you
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