Nasdaq is extremely close to making a new all time high. This is a great area in terms of risk and reward for the bears, and possibly for the bulls as well.
As mentioned in my previous ideas, exchanges sell their order flow of their users to high frequency trading firms and institutions. This means market makers with billions of dollars know where everyone's stop loss is, and in this case, it doesn't take a genius to know that there are a load of stop losses above the previous all time high.
They have a huge incentive to push the market to a new all time high as it will trigger a short squeeze, but there is a lot of resistance at this level, so it's not clear if they'll be able to do it. Plus there are new shorts suppressing the price at the moment that will make it more costly for market makers to push it above these levels. On this chart, there is strong overhead trendline resistance (orange) that appears on the daily chart, and there is also strong overhead trend line resistance that appears on the monthly chart (not pictured but you can find it in my previous ideas).
The best way for market makers to cause a short squeeze would be to aggressively buy when there is low liquidity, which happens during after hours trading.
If, and after the short squeeze happens, the price will likely come back down eventually to test the break out. If this holds, we may see Nasdaq continue to rally for months if not years. If this doesn't hold, then anything is possible, however Nasdaq has a very strong history of staying on an uptrend. If you zoom out on the chart, you'll see for 90% of the days or more, Nasdaq is usually on an uptrend. The downtrends tend to be sharp but do not last.
In summary, if I was a market maker, I'd buy during after hours trading which would cause a huge short squeeze when the market opens tomorrow. Then I would wait for the momentum of the squeeze the slow, then short in hopes that the new high wont hold. If the new high holds, I would long again.
For those of you who are in disbelief that Nasdaq would rally non-stop since the March low, you are in good company, I don't think anyone saw this coming. Keep in mind the fed is printing tons of new money and introducing it to the markets, namely bonds, but that money trickles into equities as people sell their bonds. Inflation is usually seen first in equities, then home prices, then consumer goods. What the fed has done is unprecedented, and what we're seeing here with a rally this strong in the Nasdaq is also unprecedented and likely a result of the newly printed money leaking into equities.
This is another case of fomo traders (first time traders usually) and institutions making a killing while knowledgeable traders try to catch a top by trading against a strong trend. Shorts had their stops hit all the way up, and bear/short capitulation is likely to happen if they're able to push the price above the high.
Please see my related idea below to see the trend line resistance that appears on the monthly chart.
As mentioned in my previous ideas, exchanges sell their order flow of their users to high frequency trading firms and institutions. This means market makers with billions of dollars know where everyone's stop loss is, and in this case, it doesn't take a genius to know that there are a load of stop losses above the previous all time high.
They have a huge incentive to push the market to a new all time high as it will trigger a short squeeze, but there is a lot of resistance at this level, so it's not clear if they'll be able to do it. Plus there are new shorts suppressing the price at the moment that will make it more costly for market makers to push it above these levels. On this chart, there is strong overhead trendline resistance (orange) that appears on the daily chart, and there is also strong overhead trend line resistance that appears on the monthly chart (not pictured but you can find it in my previous ideas).
The best way for market makers to cause a short squeeze would be to aggressively buy when there is low liquidity, which happens during after hours trading.
If, and after the short squeeze happens, the price will likely come back down eventually to test the break out. If this holds, we may see Nasdaq continue to rally for months if not years. If this doesn't hold, then anything is possible, however Nasdaq has a very strong history of staying on an uptrend. If you zoom out on the chart, you'll see for 90% of the days or more, Nasdaq is usually on an uptrend. The downtrends tend to be sharp but do not last.
In summary, if I was a market maker, I'd buy during after hours trading which would cause a huge short squeeze when the market opens tomorrow. Then I would wait for the momentum of the squeeze the slow, then short in hopes that the new high wont hold. If the new high holds, I would long again.
For those of you who are in disbelief that Nasdaq would rally non-stop since the March low, you are in good company, I don't think anyone saw this coming. Keep in mind the fed is printing tons of new money and introducing it to the markets, namely bonds, but that money trickles into equities as people sell their bonds. Inflation is usually seen first in equities, then home prices, then consumer goods. What the fed has done is unprecedented, and what we're seeing here with a rally this strong in the Nasdaq is also unprecedented and likely a result of the newly printed money leaking into equities.
This is another case of fomo traders (first time traders usually) and institutions making a killing while knowledgeable traders try to catch a top by trading against a strong trend. Shorts had their stops hit all the way up, and bear/short capitulation is likely to happen if they're able to push the price above the high.
Please see my related idea below to see the trend line resistance that appears on the monthly chart.
Note
Price came back and retested the all time high breakout. So far it is holding and is a great area to trade in regards to risk:reward - bull or bear.Note
My goal is to find the best risk:reward setups. For instance, if you risk $1,000 at a chance to make $5,000, you can afford to be wrong 4 out of 5 times and still not lose money. I hit my targets over 50% of the time.
Related publications
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.
My goal is to find the best risk:reward setups. For instance, if you risk $1,000 at a chance to make $5,000, you can afford to be wrong 4 out of 5 times and still not lose money. I hit my targets over 50% of the time.
Related publications
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.