QQQ put on an impressive rally today. However technicals on the chart suggest that this rally could be a dumb money rally, and what faces the bulls could be a hard trap.
This argument is mainly based on the hourly chart.
Key take aways:
(1) Notice how a bullish divergence developed at the key support level at 7000, and a hidden bearish divergence at 7100 level.
(2) If price fades below the previous high at 7137, we would be making a lower high and lower low, which could be the start of a downward channel.
(3) About the bullish divergence: notice that the third leg down, which extended the bullish divergence on the indicators first developed as a result of the thrust down to 7000 on Wednesday, DID NOT occur during the regular session. That means that the bears did not really attack the 7000 level. Also notice the absence of defense at the key 7030-7047 range, which should be a critical level for the bears if the break of 7000 level earlier today was serious.
(4) About the hidden bearish divergence: notice that the price has now made a lower low compared to the June 27th high at 7137, but the indicators have made a higher high. This suggests that selling pressure from the above is huge, and bulls are having trouble pushing the price up over 7100 level.
Based on the above reasoning, the bullish divergence on the hourly chart may not play out and may very well turn into a bull trap that will close hard on retail traders when the price was forced down below 7000 on either Friday or Monday.
My personal bias on what we might be experiencing is the a complicated 3rd wave providing that the initial thrust down from 7350 to 7000 is the first wave, and the bounce to 7130 is the second. If so, price should reverse shy of 7100 as it is the 0.786 fib retracement level measuring the thrust down from 7130 to 7000 on Thursday. It could also be a complicated wave 2 as a continuation of the bounce after the initial tag of 7000 level with an artificial stop run occurring in between. If so, price should not close far above 7130 level on Friday. The facts that the first high on June 27th was faded at 7100 level and selling occurred aggressively suggest that this bounce could be dead well before fully played out.
Friday is the end of quarter, which usually will be an up day. However, next week will see low liquidity, as many go on vacation. Therefore, a stealth move is very well possible at the start of July. Let's see what happens.
This argument is mainly based on the hourly chart.
Key take aways:
(1) Notice how a bullish divergence developed at the key support level at 7000, and a hidden bearish divergence at 7100 level.
(2) If price fades below the previous high at 7137, we would be making a lower high and lower low, which could be the start of a downward channel.
(3) About the bullish divergence: notice that the third leg down, which extended the bullish divergence on the indicators first developed as a result of the thrust down to 7000 on Wednesday, DID NOT occur during the regular session. That means that the bears did not really attack the 7000 level. Also notice the absence of defense at the key 7030-7047 range, which should be a critical level for the bears if the break of 7000 level earlier today was serious.
(4) About the hidden bearish divergence: notice that the price has now made a lower low compared to the June 27th high at 7137, but the indicators have made a higher high. This suggests that selling pressure from the above is huge, and bulls are having trouble pushing the price up over 7100 level.
Based on the above reasoning, the bullish divergence on the hourly chart may not play out and may very well turn into a bull trap that will close hard on retail traders when the price was forced down below 7000 on either Friday or Monday.
My personal bias on what we might be experiencing is the a complicated 3rd wave providing that the initial thrust down from 7350 to 7000 is the first wave, and the bounce to 7130 is the second. If so, price should reverse shy of 7100 as it is the 0.786 fib retracement level measuring the thrust down from 7130 to 7000 on Thursday. It could also be a complicated wave 2 as a continuation of the bounce after the initial tag of 7000 level with an artificial stop run occurring in between. If so, price should not close far above 7130 level on Friday. The facts that the first high on June 27th was faded at 7100 level and selling occurred aggressively suggest that this bounce could be dead well before fully played out.
Friday is the end of quarter, which usually will be an up day. However, next week will see low liquidity, as many go on vacation. Therefore, a stealth move is very well possible at the start of July. Let's see what happens.
Note
Note
Notice however that it is still possible bullish that QQQ rallies big time on Friday, pushing RSI into overbought territory and then briefly pullback on Monday.Note
Some initial weakness shown from a 15 minute time frame wedge, which already played out with a BANG.invst.ly/7vpyk
Note
That means hidden bearish divergence is now official!invst.ly/7vq0k
Note
It turned out that the bull trap did not play out. What played out is a bear trap. However the market has now gone vertical. Any drop from here will be major.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.