By John Sheridan, Trade With Precision
With many of the global indices are showing strength at the moment, for me the pick of the bunch is the NDAQ100. This has been on an upward trajectory for a very long time and, whilst nothing lasts forever, for now at least the signs are that this market may still have potential to the upside.
Looking at the monthly chart below, the outlook looks bullish. Having been in a long-term uptrend it is now at all-time highs, again. The strength of the trend is confirmed by the moving average (MA) geometry, which is in a fanning pattern, with the shorter-term averages above the longer-term ones and an absence of divergence on the indicators suggesting there may still be momentum left within this uptrend.
On the weekly chart, the price action looks strong. On this timeframe, the price action remains bullish with a clear series of higher highs and higher lows. And again, the MAs are in a fanning pattern, implying a strong trend. This is a great example of an uptrend, where the MAs haven’t crossed over one another for multiple months and when price does become over-extended from the MAs it pulls back to them before resuming the uptrend. This is the exact scenario I will be looking for on the daily timeframe.
Moving down to the daily chart, price is in a smooth flowing uptrend with a series of higher highs and higher lows and once again the MAs are displaying the bullish fanning pattern. As for the oscillator indicators, the MACD has begun to turn around and head higher with RSI following suit. Price has become over-extended from the MAs, which means there isn’t an immediate entry available, but history would suggest that a pullback to the MAs could present a possible lower risk entry.
My plan will be to look for price to pull back to the zone around the 10 and 20 period MAs and then for a bullish reversal candle to form. The confirmation for trade entry would be the break of the high of the reversal candle and I’ll look to place my stop loss under the swing low.
It’s not often that such a strong trend forms across three timeframes and these types of setups have could have the potential to yield possible returns. However, we are currently living through very turbulent times, so if a trade entry does form, I’ll be managing it carefully by moving my stop loss up as and when new swing lows form to lock in any potential profit.