The NASDAQ 100 E-mini (NQ) shows technical conditions that indicate an attractive long swing trade scenario. The dip in NQ from its 12/31 high resulted in a reversion to the daily mean (20-day simple moving average) that attracted buying. And the mean continued to rise. This is a typical pattern of behavior during a dip within an uptrend that has further to go. As long as the mean is rising, the uptrend is affirmed.
Second, the consolidation on Thursday and Friday resulted in spinning tops. These are candles with diminutive real bodies and upper and lower shadows. The implication is that price strength attracted selling and price weakness attracted buying, indicating supply and demand were in balance. That suggests pent-up demand and a squeeze of those who sold short should propel price higher if the market resolves to the upside.
One way to think about the trade is to place a stop loss beneath the low point of the Thursday-Friday congestion, and target an exit at the upper Bollinger Band. Conditions are similar for QQQ (PowerShares QQQ Trust).
And in the interest of accountability, the Friday drop in TBT (UltraShort 20+ Year Treasury Bond Fund) proves my bullish take on this ETF last week was wrong. The fact that price resolved a recent range down heightens the risk of deeper losses.
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