E-mini NASDAQ: To Chase or Not to Chase, That is the Question

The June E-mini NASDAQ futures contract is expected to open higher on Wednesday based on its strong performance overnight on the heels of an outstanding earnings report from Apple Inc. (AAPL). The company reported earnings yesterday that almost doubled last quarter. The stock gained over 5% in after market trading, whetting the appetites of higher risk traders and driving up the tech-laden NASDAQ market.

The strong overnight move in the June E-mini NASDAQ futures contract has helped form a new minor bottom at 2624.75. Subsequently, a new minor range has been formed between 2735.00 and this bottom. The market is currently straddling the 50% level of this range at 2680.00. If the market can hold this level, then look for the move to continue into the 61.8% level at 2693.00.

James A. Hyerczyk Forex, Futures, & Equity Analyst

Price and time analysis suggests that a downtrending Gann angle at 2703.00 is also a potential upside target, but reaching this level today is highly unlikely. However, this Gann angle crosses the 61.8% level at Point A on the chart on April 26, forming a potential resistance cluster at 2693.00 to 2695.00. Should the upside momentum continue into next week, the market has another potential target at Point B on the chart on April 30. This resistance cluster is 2707.00 to 2708.25.

Before getting too bullish, traders should keep in mind that the main trend is down and that the current action represents a short-term counter-trend rally. Because of the retracement and Gann angle configurations, the rally is expected to be labored with shorts likely to defend their positions. Additionally, the strong overnight action could chase away buyers who may be unwilling to pursue the market at current levels.

This usually means that any hesitation in the rally shortly after the opening could lead to a profit-taking break triggered by traders who bought on Tuesday prior to the Apple announcement. Yes, the news is good for the bulls, but traders have to avoid getting caught in a trap shortly after the opening. The key today will be reading the market after the opening since the overnight gains are so strong.

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