NQ! / Nasdaq Short then Long
Updated
Nasdaq 100 and NQ! (E-mini Nasdaq Futures) are at make or break levels.
A bearish flag pattern has formed, which is visible on intraday charts such as the 130-minute chart shown above. A bearish flag, according to famed technical analyst Martin Pring, is a parallel trading range accompanied by a trend (uptrend or downtrend). In a downtrend, he says, a flag is usually formed with a slight upward bias.
When price violates the lower part of the flag, the sharp slide often resumes and volume may pick up. But the downward breakout need not be explosive.
Note the triangle pattern on the daily chart as well, which also confirms the tightening consolidation seen in both the Nasdaq (cash index) and the futures. These consolidations imply a price breakout is imminent, a consolidation being a sort of gradually tightening battle between buyers and sellers.
However, the bearish flag and the downtrend line both suggest that the breakout could be to the downside.
Lastly, given how oversold NQ! / Nasdaq is on a daily chart, it seems that this breakout to the downside could lead to an excellent rally off meaningful tradable lows. Try a Fibonacci retracement of the move lower from all-time highs, and look for a reasonable target for the bounce around the .50 retracement or the .618 retracement.
This is for educational purposes only. Please do you own research for your own trading and manage risk properly (position sizing, soft stop losses, and profit targets).
A bearish flag pattern has formed, which is visible on intraday charts such as the 130-minute chart shown above. A bearish flag, according to famed technical analyst Martin Pring, is a parallel trading range accompanied by a trend (uptrend or downtrend). In a downtrend, he says, a flag is usually formed with a slight upward bias.
When price violates the lower part of the flag, the sharp slide often resumes and volume may pick up. But the downward breakout need not be explosive.
Note the triangle pattern on the daily chart as well, which also confirms the tightening consolidation seen in both the Nasdaq (cash index) and the futures. These consolidations imply a price breakout is imminent, a consolidation being a sort of gradually tightening battle between buyers and sellers.
However, the bearish flag and the downtrend line both suggest that the breakout could be to the downside.
Lastly, given how oversold NQ! / Nasdaq is on a daily chart, it seems that this breakout to the downside could lead to an excellent rally off meaningful tradable lows. Try a Fibonacci retracement of the move lower from all-time highs, and look for a reasonable target for the bounce around the .50 retracement or the .618 retracement.
This is for educational purposes only. Please do you own research for your own trading and manage risk properly (position sizing, soft stop losses, and profit targets).
Note
It looks like the short-then-long thesis was partially incorrect. The rally starting Jan. 28 has been the powerful rally I had been expecting. But I anticipated another retest of Jan. 24 lows first based on Elliott wave structure b/c it looked like a Wave 4 was forming off Jan. 24 lows, which implied a 5th wave down. I guess the 5th Wave is still possible, but it is unlikely at this point. Wave 4 cannot retrace any portion of Wave 1, so if NQ rallies above 15,152 (and it's already hit 15,149 this evening), then the 5-wave structure is invalid. In addition, the bearish flag did not perform as expected. I wonder what the percentage success rate is for bearish flags -- does anyone know? Very little in this market has been going as expected!
Note
It's possible a bearish flag still exists. Note also the downtrend line (short-term) and the whipsaw that occurred as price broke through the downtrend then reversed back below it. Because traders should be flexible, I am willing to redraw a bearish flag as new price information prints, showing new boundaries for it. But at some point, though, a pattern should not be continually adjusted to fit price data when the pattern is clearly not working as expected. But the price action the last couple of days has been nothing but indecisive, and has remained in an apparent flag pattern. So for now, I'm sticking with it until proven wrong.
Note
While price remains within the bearish flag, it will trend higher in the short term. Given indices are short-term positive, I should note that IF the bear flag patter is valid, price will continue to rise within the flag until the pattern is negated or confirmed. In other words, the flag shown is a rising channel, so until a downward breakout occurs, price should find support at the rising trendline (connecting the lows) and find resistance at the return line (upper channel line).Note
And the triangle pattern has confirmed an upward breakout in the short term. The markets have been really mixed lately, and I've noticed high level pro traders being quite uncertain as the market chopped the last few days. But one wise trader I know commented that Goldman Sachs wrote in a recent note that certain restrictions are being lifted on stock purchases / buybacks at US public companies, so now that earnings are almost finished for most S&P 500 companies, this extra buying power should add fuel to the short-term rally we're seeingNote
So price is decisively breaking out of the bearish flag pattern today to the downside, confirming the pattern. Given the powerful upward price action over the past week, it's been challenging to think that the bear flag was valid. But sometimes, it pays to be patient with technical analysis, giving the patterns / ideas enough time to work out! 
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