Will the NASDAQ push 4,000 ticks?
Hey everyone, Joshua Martinez here with tradersagency.com and welcome to this week’s idea. Today’s date is March the first, 2021, and behind us is the NASDAQ-100 on a daily time frame. Now remember, we do like to utilize larger time frames to give us an understanding of what the next push could be. And according to NASDAQ on the daily time frame, when the mark comes near the bottom of this blue level in this up expanding channel, the market begins to rally. And if this market were to continue to rally to the top blue level, it is about a 4,000 tick push, now what is that worth with an E-mini contract, every ticks worth about $5, that could be worth 20,000 US dollars.
At a micro, every ticks worth about 50 cents, this could be worth nearly 2000 US dollars. Both opportunities, is a substantial amount of potential return, especially when we look at the time, which it could be one to two weeks worth of a push, so we really got to pay attention to this one. All right, so how do we discuss this? Well, I’m going to draw it out, I thought it went really well last time when we did this, made a lot of sense to a lot of people, and so hopefully we’re going to be able to really accomplish that. Ultimately, what we like to do here at Traders Agency, is we believe that the markets U-turn at, on, and or around the same price points. So oftentimes what we’ll notice, is we’ll notice that when the market begins to move, it will generally move in a similar direction.
We look at the pattern
And what we try our very best to do, is we try to look at the pattern, we look at where do lows form, where do highs form, and we’ll bring in hand drawn trend line. Now, we do like to work backwards, and the reason why, is because markets typically U-turn at, on, and or around the same price points, and it’s a little bit easier by looking at the present information and working our way back. Now, in this scenario, you can begin to see that we have a upward channel, you can see that the channel is starting to expand, which means every time the market comes near the bottom blue level, or the top level, the opportunity gets bigger and bigger and greater. So right now we have this pattern, hypothetical pattern, and when or if the market comes near the bottom blue level, a smart idea would be to look to buy the market at, on, and or around the bottom level.
Now, if this market were to U-turn up, let’s just say in theory, that’s 4,000 ticks and let’s just say this is a daily time frame. Well, the challenge with this is, do you just buy the market because it’s low, or do you wait for confirmation? And what I like to do, is I like to wait for confirmation.
What does that look like?
Well, if we focus in on this section right here,
I’m going to highlight that in pink, but at least focus on that section. On your smaller time frames, such as a one hour time frame, this downward push would look like a downtrend, it would look like the market is making lower lows, lower highs. And what you can do, is you can bring in a downtrend angle off your one hour time frame and you notice that as the market begins to dip down it’s creating a downward trend.
Now, what we have found is, by the way, this is the daily time frame, hypothetically, this is the one hour time frame, what we have found is as a daily time frame begins a U-turn, your downtrend on the one hour time frame is broken and then the market creates an uptrend. And if we can find an uptrend off the one hour, when the daily is near a known level U-turn, is usually where we find our best trades. Once again, high level, if the market is making higher highs and higher lows off the daily, and we are in an uptrend, and here is the uptrend line off the daily, we’re going to go to the one hour time frame, but we’re going to look for an uptrend. Because if the one hour time frame forms… Oops. If the one hour timeframe forms an uptrend line, it normally means that the daily is going to extend up.
So let’s go back to the daily time frame of the live chart. So right now the market’s at the bottom of the blue level. If we buy the market now, based upon the market being at a low price, if we’re right we could make extra ticks, which is great. If we’re wrong, we’re going to lose the trade because the market can have a sell off. So we don’t want to buy the market just because it’s low, we actually want to go to a one hour time frame, and here is the one hour time frame that we have. Here’s that downtrend line off the one hour, here’s the market breaking the downtrend line, entering into the buy zone, so we’re already breaking the downward structure. And so now we can talk about risk tolerance. In trading, how this typically works is this, if you were to close your eyes, put a blindfold on, flip a coin, and just guess the direction, you got a 50% chance of being right, and a 50% chance of being wrong, if you just purely guess.
Trading with momentum
If we simply buy because we’re in the buy zone, anything above the downtrend line’s the buy zone. If we buy above in the buy zone, naturally, we have a greater than a 50% chance of winning because we’re trading with momentum. Just like if we were to sell in the sell zone, we have a greater than 50% chance of a winning if we were to sell in the sell zone, because momentum down. The fact that we’re in the buy zone, the fact that we just entered in, if we focus on buying, we’ll probably going to win more than half are trades moving forward. So here’s the challenge, how much risk do we want? Because as the market goes up, it’s going to move away, as you can already see it, higher highs, higher lows, higher highs, higher lows, higher highs, higher lows.
This market right now, is extending and is looking to form a high, higher than this high, and then naturally, the market’s going to pull back and form a low. Now if, you as a person, can say, “Hey, I’m going to buy low in the buy zone.” Then what you can begin to do is you can eliminate some risk, eliminate some drawdown because you’re buying a low price, and then you get to hold the trade towards the future high price, so you buy low, you profit high in the buy zone. So you want to win more than half your trades, according to the research by default, if you just buy in the buy zone, sell in the sell zone, you pretty much can win more than half your trades. If you buy low in the buy zone, then you can win more than half your trades with less drawdown.
Wait for the low
And so right now, if you buy now, you probably will go with the drawdown because the market’s pretty much at a high price. If you wait for the next low, you’re pretty much going to be in good shape. So right now, here’s the idea, NASDAQ-100 is inside of an up channel, has been here since around November, December, okay. You can see that we’re at the bottom of the channel, we’re U-turning, we’re pushing up towards the top of the channel. If this market continues bullish, we have about a 4,000 tick rally. The one hour time, I’ve just gone into the buy zone, we’re starting to wave and the buyers are starting to take control. And if you buy now, you probably will win, but you’re going to have some drawdown, If you wait for the low price, you’ll probably win the trade with less drawdown.
We’d like to place our stops in the opposite zone, so stops below the blue level, that’s your sell zone, and then you can use Fibonacci’s on the way up, or you can simply hold onto the buy trade towards the expected limit off the daily time frame. All right everyone, this is Joshua Martinez, hopefully it’s made a lot of sense, appreciate the opportunity, and we’ll see you next week.