US stocks, led by mega cap tech companies and the NASDAQ writ large, started 2024 on a hot streak. But as momentum slowed, an arc pattern supporting the market became clear, only to be decisively broken. Analysis of key support and resistance levels provides price targets for the coming weeks.
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Volatile action post-market on Thursday means we may open Friday right around the arc level. If this is the case, prepare to enter into the short trade tomorrow!
Assuming we do get our first arc touchpoint, here is the rough gameplan I am hoping to implement -
First, I will buy put options for both the 5/14 and 6/6 targets (specific contracts TBD).
Assuming the 5/14 target is achieved, I will then buy a call option in anticipation of another arc touchpoint.
If we get that touchpoint, then I would add to my contracts for the 6/6 put option.
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We now have an almost exact arc touch, but be cautious here! I am waiting for a clear reversal to the downside as my entry signal.
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We have what looks to be a head and shoulders nearing completion on the intraday chart as heavy volume selling is coming in, with the neckline centered directly at the arc level. While there is risk here, and the pattern did not develop exactly as I would have liked, it may be prudent to open a starter position before markets close for the week.
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After trading much of the day above arc resistance, strong selling came in at close, and QQQ finished the week 28c below the daily resistance level of $431.28! This gives us a very strong touchpoint on our trendline.
The intraday reversal signal described in the above update was an opportunity to open a starter position, but in order to open a short position with a higher level of confidence, what we now want to see is a reversal signal Monday on the daily chart.
Order cancelled
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Unfortunately, we gapped up above resistance at open. You should be able to close any starter positions that were opened Friday with minimal losses here.
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The April 29th candle does look to be a potential false breakout here. Not the cleanest pattern, as I would have liked to see stronger resistance shown here and then a false breakout on the third test of the arc. Nevertheless, April 30th saw a good plunge back below the arc, so the general path laid out in this idea may still play out, even if the arc resistance didn't quite hold.
@BarryStocks, I see QQQ moved close to 427, where do you see from here Thanks
BarryStocks
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If price does follow kumo as predicted, then it would dip slightly and go sideways, then up to a slightly higher value (closer to 428) where it intersects with the arc. But it could also continue straight up and intersect the arc at a higher value.
In any case, the intersection with the arc itself, with a resulting reversal candle, is the confirmation of arc resistance I am looking for, not the specific price level.
its looking like an inverted cup and handle at this point, the 50ma could be hit by the end of next week and then I expect it to sell off to the 50ma on the weekly... 376-380 range. fingers crossed
karthikworld
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Thanks, but it has formed Higher high than last Wednesday
BarryStocks
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@karthikworld Intraday crossover is OK, what we are looking for at minimum is a daily close below the arc. If we don't get that, then it might be time to take this idea to the woodshed!
karthikworld
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@BarryStocks, I dont think we are going bottom but there will be pullback, once 20 DMA captured next 50 DMA. Market structure turned bullish in 2h chart