Obvious Short In The Stock Market, Likely To Squeeze?

Nasdaq 100 CFD: There are some important technical points to consider before starting off the new week. The 10,950 inflection point was a previous resistance and is now acting as a new support. While it is not a major level, this is a very risky point to be short this market or tech stocks at least for the early part of next week.

There is a short signal in effect, so why is this a high risk location for shorts? There has been little bearish follow through on earlier attempts to break the 10,950 area. Often this is the result of too many shorts, or a trade that is too obvious. In this situation, probability favors a bullish retrace, or short squeeze at least over the next few days.

Based on the swing trade strategy that we employ, the attractive levels for new shorts are in the high 11Ks or low 12Ks. In an extreme scenario, the market can even push the 12,400 area high once more and fail. A lower high established off the 12K resistance would be ideal and that is where we would be looking to open aggressive positions in the UVXY, IWM or even the QQQ using options.

The key is to WAIT for a technical setup that allows for a clear assessment of reward/risk and probability. No setup means no trade. Anyone can come up with trade ideas or scenarios, but the market needs to provide evidence of agreement, and risk has to be managed. There is no room for logic or opinions in such a highly random environment, especially over such a short time horizon of a few days to weeks.