Good morning, Traders! It’s time for our Daily Direction update. We’re seeing some crazy developments in the Nasdaq 100 E-mini Futures market! When setting up my trade positions this morning, I was intrigued when I saw a sudden positive turn in the NQ. The price is turning bullish for the day, but there are some very important details that we need to look at before we get too excited about that bullish change. If we aren’t careful, we could be falling into a trap if we don’t dig into the data behind this sudden bullish bump.
The Nasdaq 100 E-mini (NQ) is a futures market that tracks the Nasdaq 100 index. The Nasdaq 100 Index consists of the largest, most actively traded U.S companies listed on the Nasdaq stock exchange. Most of the companies on the Nasdaq belong to the tech sector, meaning the index sees quite a bit of trading action thanks to the interest in tech companies.
Daily Timeframe Analysis
The daily timeframe chart clearly shows the NQ price going bullish. But there are a few caveats to consider. First, the daily low is lower than yesterday’s low. Second, today’s high is still lower than yesterday’s high. What does that mean? Well, based on those two factors, we can comfortably conclude that the NQ is still in a bullish trend. The highs aren’t steadily increasing, and the lows are still getting lower despite the recent bullish turn.
The NQ daily timeframe shows the current price (last green rectangular tick) turning bullish compared to the previous day. But the highest price (thin wick at the top of the green rectangle) is too low and the lowest price (thin wick at the bottom of the green rectangle) is also too low.
That tells me we’re still in an overall bearish trend because we aren’t beating the high and low prices from the previous day. Remember, the market trades in waves. Within an overall up or down trend, you’ll see drops and spikes in the price along the way as the price fluctuates while trades are made. But that doesn’t mean the trend is changing.
While this bullish push may look enticing to those ready to buy, let’s turn to the one-hour timeframe to get a more detailed and “zoomed in” view of the trading data.
One-Hour Timeframe Analysis
Turning to the one-hour timeframe for the NQ, we can better see the overall bearish trend. The current bullish turn is just a blip on the general downward trend. The NQ price has broken through into the sell zone, formed a new low, rallied back up, and looks to be heading back down again. That’s the benefit of zooming in with an hourly timeframe. We can see the details at a more granular level.
The one-hour timeframe showing how the NQ price has significantly dropped from the top of the channel (upper grey line) and headed to a new low (below the middle grey line)
Realistically, we could see the NQ forming a higher price than its current high, then head for the selloff before we see a true bullish push back to the top. That’s the conclusion I’m sticking to, and here’s why: I see no evidence that the market will produce higher highs and higher lows, resulting in a new bullish trend. Instead, I believe we’ll see a continued bearish trend. And here’s why…
The Bottom Line
I expect the NQ to continue moving toward a significant sell-off because it’s hitting a previous level of resistance that has historically forced prices lower. I’m confident that we’ll see the same thing happen to the NQ in the near future. These lines of resistance are a reliable way to monitor price changes as they have historical market data to back them up.
That’s why it’s important to double-check your data when you see a sudden price change as we have in the Nasdaq 100 E-mini. It can easily trick traders into thinking the market is in a buy position, resulting in a premature buy and a losing trade.
I can not stress this enough: my analysis is critical to avoiding these sorts of pitfalls in your daily trading routine, and that’s why you need to follow along as I show you how I set up my trading strategy to spot these speed bumps in the market.
Mindset Advantage: Exercise
Get rid of that nervous energy so you can focus! There’s a direct relationship between vigorous exercise, and stress management.
How many times have you found yourself sitting, staring at your screen and then suddenly realizing that you’ve been sitting there for hours? You’re trying to ride out that position while worrying about a loss.
Get up! Move around! Go for a walk. Motion creates focus. Focus creates positive energy and clarity! Better yet, add an exercise element to your trading routine! Your health and your account will thank you.
Definitions of Futures Terms
Sell-off: when a large volume of futures are sold in a short period of time, causing the price of a future to fall in rapid succession
Resistance: The high level a stock price reaches over time, serving as a visual cap that the market generally stays below. Reaching resistance usually results in a price drop.
Support: A price that a stock/future drops to that prompts traders to buy. This reactionary buying causes the price to stop dropping and start rising.
Sentiment: the overall attitude of investors toward a particular financial market. It can drive the price of a market up or down.