Head and Shoulders pattern on QQQ and large bear flag developing
The current price action in the channel in yellow looks similar to the right shoulder above it. (That too is a large bear flag from the right side of the head)
Looks like the QQQs could to take a bigger hit in the near future unless the price can pull above the current channel (in yellow) or on the other side of the downward trendline (in purple). If it does breakdown further, I see a gap to be filled at the 276 level that could indicate the bottom.
The 5 Year MACD shows red and only appears when the QQQs had significant market correction.
You might be able to play the QQQs in the current channel. Candles on the 15M show green and the indicators are saying it could head back up to complete the bear flag (see orange) and if the top channel or downward trendline rejects it, then it will head back down. Use stop losses outside the channel levels to reduce your risk.
Looks like the QQQs could to take a bigger hit in the near future unless the price can pull above the current channel (in yellow) or on the other side of the downward trendline (in purple). If it does breakdown further, I see a gap to be filled at the 276 level that could indicate the bottom.
The 5 Year MACD shows red and only appears when the QQQs had significant market correction.
You might be able to play the QQQs in the current channel. Candles on the 15M show green and the indicators are saying it could head back up to complete the bear flag (see orange) and if the top channel or downward trendline rejects it, then it will head back down. Use stop losses outside the channel levels to reduce your risk.
Comment:
The Bears won today's fight. The first step was to test the purple trendline and it was rejected. This looks very similar to the end of Mar 1 to Mar 2.
These algos are brutal, as the price gapped up in the morning, early retail traders fomo'd in to tech and bought it up. Then they pulled the ladder.
The price retreated back to the support level filling in the morning gap.
The fight isn't over, the bulls have another chance. The next step is to retest the trendline again. If the price bursts up through the trendline, then the bulls will need to retest the trendline from the top before going up.
If a rejection happens tomorrow, then this is confirmation that the bears won.
I am leaning more bearish as the 1st step has completed.
Also a theory I have heard is that with call options expiring Friday, if the price closes lower Thursday and stays low Friday, say to fill in the Tuesday's gap, then bull traders will have to sell their call options and therefore amplify selling.
These algos are brutal, as the price gapped up in the morning, early retail traders fomo'd in to tech and bought it up. Then they pulled the ladder.
The price retreated back to the support level filling in the morning gap.
The fight isn't over, the bulls have another chance. The next step is to retest the trendline again. If the price bursts up through the trendline, then the bulls will need to retest the trendline from the top before going up.
If a rejection happens tomorrow, then this is confirmation that the bears won.
I am leaning more bearish as the 1st step has completed.
Also a theory I have heard is that with call options expiring Friday, if the price closes lower Thursday and stays low Friday, say to fill in the Tuesday's gap, then bull traders will have to sell their call options and therefore amplify selling.
Trade closed: stop reached:
Bulls won the war. The Algos did it again but it was a bear trap. In the premarket the price gapped above the trendline and tested it multiple times. Then at the open it looked like yesterday's price action with the gap up and and a reversal towards the downside, luring bears into thinking it was a repeat. But this time it was to retest of the trendline. After touching it, it reversed and continued upwards busting through the next resistance level and finally coming down to it on at the close. It's now a support level. Man that's so sneaky to set this trap using the pre-market.
The two different scenarios:
Bear scenario:
The price breaks above the purple trendline to knock out bear stop losses and also lure bullish traders. It would need to come back down to break below the purple trendline. It will then have to also break below the 311 support level. And last it will need to go back up retest the purple trendline again. If it gets rejected then it's confirmation and the bear scenario will continue. See Mar 2.
One thing in favor of a bear scenario is that the price jumped up this morning and left a gap between 302 and 306. They say gaps usually get filled.
Bull scenario: the price breaks above the purple trendline. It would need to go back down and retest the purple trendline to lure bears and knock out any bullish stop losses. If it bounces up off the trendline and continues, then it's confirmation and the QQQs have recovered.
One thing in favor of the bulls is that the price action exceeded my channel as it went above it as well as a support level and then came down and is now currently sitting on top of support at 311 but it's still below the purple trendline. This is different than what happened on Mar 1 as the price closed just at the support level from below. So in the bull scenario it does have support.
As for the gap, it usually does get filled, but it doesn't mean it will get filled tomorrow or the day after. It could get filled much later. See Feb 2, it took until Feb 22 to fill that gap.
The best approach is to wait for confirmation.
I will wait until I see confirmation from either scenario before entering a trade. Let the bulls and the bears fight it out and go with the victor than risk going too early.