The target for the NQ futures on Friday was 4467 and they reached 4462 on a sudden jobs report rally. The irrationally exuberant surge was most likely a short covering rally, due to excess pessimism last week. Just as it doesn’t pay to get bearish during corrections, it doesn’t make sense to get bullish on strong rallies.

With that in mind, this market is probably still in gap fill mode. There is an unfilled gap a bit higher, at 4470, so I expect that level will be attained sooner than later. However, it also makes sense to expect this newest gap around 4409 to beckon. The 4409 level also corresponds to the Volume Point of Control on this 30-day profile, another magnetizing factor.

So one scenario I’ve sketched on the back of my strategy napkin is a Monday morning move to fill the 4470 gap and then a “surprising reversal” down to 4409. But while it is always useful to have a general roadmap in mind, always trade what you see, not what you think.

Reid_5-11-2015_NQ.png

A Note on Volume Profile

The histogram on the left side of the chart shows the volume distribution in the Nasdaq futures for different periods of time. Key support and resistance levels are indicated by the peaks and troughs.If you would like to receive a primer on using Volume Profile, please click here:  www.daytradingpsychology.com/contact 

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