Friday, March 22, 2013

NQ Trade / Week of Mar 17 to Mar 23

The NASDAQ (NQ) futures contract is in an overall uptrend since the pivot low in November 2012. It is in a slow and steady climb, but no doubt slowed by the last couple of quarters weakness in AAPL.

March futures recently rolled over to June. As a refresher, the mini-NQ contract is valued at 20 USD per point, with a minimum tick size of 0.25

Here is a recent trade setup, both bearish and then bullish over the course of two to three days:

The LARGER daily timeframe trend is up. We are printing higher lows and higher highs. Keep it simple. The plan is to buy high quality demand areas, and low on the curve.

Scanning down into the 15 min chart reveals a couple of opportunities, one countertrend and one trend.

Time Frame - Approximately 2 days / 15 min chart

Trade #1 - Short NQ

Wednesday's closing session showed a strong drop right near the close.  A basing pattern appears to be forming This is price forming a potential DROP - BASE - DROP.

Take a Short Entry position with a stop just outside the zone.  This can be done as a momentum break out trade to the downside, or a wait for a retest into the supply zone.

Two target prices at T1, T2 marking previous demand zones.

The lower of the two price zones, T2, looks like a high quality demand area low on the curve. Pay attention to this area.

Trade #2 - Long NQ

As price enters the lower zone marked as T2, close any short NQ contracts and get long a position with a stop just below T2. As this market is bullish, we are looking to be aggressive on entry (#1) just at or near the zone. Price action, as shown, did not trade aggressively into the zone.

Grade The Trade (+1/2 for the Short, +2/2 for the Long)

Initial short entry is defined, though time at this level is extended. Remembering that we are in an overall market uptrend, this is an aggressive countertrend trade. Expect a quick exit. Its also entered outside of US market hours and into an overnight position. US markets opening in the morning will most likely drive price volatility and trend (as you can see in our favour) during the first few hours of the session open. Stop order will protect sudden reversals.

The long entry, marked at T2, is well defined. Price did not quite trade into this level so an aggressive #1 entry is needed. Previous time at this level was short, indicating good unfilled demand.

NQ marked a couple of long entry points in the area marked at T2. The astute trader looking at multiple time frames is given a couple of opportunities to get on board!

Both short and long swing trades easily returned 10+ points with initial risk:reward in the 3:1 range. Both trades are exited before Friday Globex close. There is no position risk over the weekend.

How you mange the position while in the trade can return you more or less. The maximum loss on the short position, were your stops too tight should not have exceeded $70 USD.

Note that Nasdaq finished strong (AAPL back at 460+) and closed at the top end of the range.  This is bullish for the Nasdaq in general.

At present, we are now looking for NQ to print a new swing high. Be on the lookout for new fresh demand zones!

Weekend news events from the EU and Cyprus banking crises will provide an excuse one way or the other. We shall soon see!

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