Joshua Martinez: The next big $20,000 trade on NASDAQ.
Joshua Martinez: Today’s date is August the third, 2020. And happy Monday, everybody. We have the NASDAQ-100 E-Mini Futures. This is the monthly timeframe, and we finally closed above resistance, which means a potential channel shift, which really means that we may get a breakout or continuation of a bullish move. We’re going to divide the market in a buys and sells zone.
Joshua Martinez: That’s going to be a little bit over 4,000 ticks for the first based overall target, which is right around $20,000 with a E-Mini contract or 2000 US dollars with a Micro. We do have Josh from behind the scenes who’s going to help walk us through the overall analysis. And this is going to be maybe a little bit of a longer video, because we’re going to do a top down analysis and plus we’re going to have Josh walk us through it. So who knows if he can get it right, or if he’s going to get it wrong, but let’s find out. Josh, welcome.
Josh: Glad to be here.
Joshua Martinez: Okay. So we have the monthly timeframe. What are the three things that the monthly timeframe provides us?
Josh: It gives us… The three things?
Joshua Martinez: Three things that it can do.
Josh: Gives us overall direction.
Joshua Martinez: Okay.
Josh: Let’s just know if we’re in the buy or sell zone.
Joshua Martinez: Yep.
Josh: And the third thing I…
Joshua Martinez: Well, the three things that when… So when someone turns on their monthly timeframe, so with those of you at home, we use the monthly timeframe for direction. And we’re looking for one of three things, up, down, or U-turns, okay? So either market’s going to go up. And if so, we’re going to look to buy it off to smaller timeframes to control risk, or it’s going to go down. And if so, we’re going to look to sell it off to smaller timeframes, or were U-turning. And if the market is U-turning, then we tend to stay out. So what we have to do when we look at the monthly timeframe is we really need to do our very, very best to find the areas of where the market potentially U-turns. So Josh, how do we do that? How do we find off this monthly timeframes, where the market forms highs and lows?
Jonathan: We can draw channel using trend lines.
Joshua Martinez: Okay. And what I like to do, everyone, is I like to work my way back. A lot of people, what they do is they’ll work their way from back to forward. And the problem with that is that’s how we’re taught in textbook-wise, back to forward. But you tend to get stuck with following the set of rules, because that’s the way you were taught, versus really truly understanding the why’s. What we’re really trying to do here is we’re really trying to find U-turns, which ultimately means that you can’t just slap on a trend line and say, “This is the trend line.”
Joshua Martinez: You got to put a trend line on that will outline the areas of U-turn. So of the things that you’re going to notice, especially with this trend line that we just brought in, notice how this market formed a low, formed a low, and then formed a low and formed a low. So we have one, two, three, four different areas where the market historically has U-turned and that’s been around since May of 2016. So there’s a lot of history too. Now, we’re going to do the same thing from this previous high, and we’re going to work our way back on the top side.
Joshua Martinez: And one of the things you’re going to notice is you’re going to notice that the market has formed an area of resistance at, on and around the top side. So let’s go ahead and bring in… here you have resistance, make that red, that’s resistance, resistance, resistance, resistance. Now, notice how this market, when it touches the top blue level, the market falls to the bottom below, because the bottom below mark rallies. You see that Josh?
Josh: Yeah.
Joshua Martinez: Okay. So what happens when, or if the markets closes above? What does that mean? So we closed above the area where the market falls.
Josh: It creates a new channel.
Joshua Martinez: Well, I wouldn’t say it creates a new channel, but more it changes the structure. And for those of you who are at home, what this ultimately means is that structure has been broken. This upward channel is realistically no longer in place. So what we’re not going to be doing is we’re not going to be looking to sell the market on the way down. There’s what’s called a shifting of channels. And ultimately, all a channel really is, is a consolidation of the angle. It’s left to right movement at an angle, right? Or left to right movement at an angle, angle up or angle down.
Joshua Martinez: So what we’re going to anticipate is we’re going to anticipate this market is going to increase and form a high and clear resistance. So we’re going to expect follow through on the upside. Then we’re going to expect the market to pull back. So right now, what we need to do is we need to focus in on this push. So the key to this success is going to be that top blue line. And that’s going to be the divider. So almost like the line in the sand. If we are below this blue line then we’re going to expect to sell it for 10,000 ticks.
Joshua Martinez: If we are above the blue line, believe it or not, we may even have a 10,000 tick rally. And you maybe saying to yourself, “Can the NASDAQ really rally that much?” A lot of crazy things have happened this year and that people didn’t think was going to happen and still happened. Technically speaking, in my opinion, we have at least another 4,000 tick push on the way up. So direction, as long as the market stays above this top blue level, according to the monthly timeframe, direction is up. Does that make sense, Josh?
Josh: Yes.
Joshua Martinez: All right. So do you want to buy the market at a low price, you want to buy the market at a high price?
Josh: At a low price.
Joshua Martinez: And what timeframe do you want to use to find your low prices, high prices?
Josh: You want to go to a shorter timeframe, like your hourly.
Joshua Martinez: You could do hourly, but what about the daily timeframe?
Josh: Daily.
Joshua Martinez: Now why would he use the daily timeframe?
Josh: Because that will let you know specifically if you’re in the buy zone or sell zone.
Joshua Martinez: Yes. But also something very, very important though. On the daily timeframe, if you’re at a low price and the market begins to U-turn on the way up, right? So we’re at a low price, it U-turns the way up, that bullish U-turn could last three days, five days, 10 days in a row. And so for most people, when they buy the market, they like buying the market and having the market go their way right away. Do you like that?
Josh: Yes.
Joshua Martinez:
Okay. So which means if direction is up and you go to a daily timeframe and see a low price, if you can buy in as the market’s U-turning, then you get to enjoy three days, four days, five days, almost 10 days of the market going your way, if your direction is right. So ultimately we really do the same exact thing off the daily timeframe. We really find where the market U-turns. And we do that by working our way back. And so here we have some U-turns, right? Here some lows.
Work our way back and notice this area. Notice back in March of 18, March 18, or March 2020, you can see that the market created this angle where we formed a high and then formed a low, low, low, low, low. The reason why I point that out is because one of the things that you’re going to have to come to conclusion on in your trading career, which I have already come to the acceptance of, is that the market U-turns at, on and around the same price points over and over and over again, and or the same angles.
And if you can find these angles in the market, you usually give yourself that edge, right? So here we have the market utilizing the same angle to form highs and lows over and over and over again, multiple times. And the market has formed a low and now it’s pushing up to form a high. So with this information, Josh, would you agree that the market forms highs and lows at, on and around the same price points?
Josh: Yes.
Joshua Martinez: Okay. So if that’s the case, one of the things that I always highly, highly, highly suggest people to do before they trade is always to look left. Now, what does that mean? Looking left just simply means grab a line, slap it on the current price point and then follow it from right to left. And ask the question, “Do we form U-turns at the angle that we’re hitting?” So Josh, do you see any highs around this pink line, which is the current price point?
Josh: Yes.
Joshua Martinez:
So you notice how we formed a high here on the 13th and we formed a high here around the 20th? What that means is we’re hitting an area of resistance. And ultimately, what that means that this market, hold that resistance, we could fall right back to the uptrend line. So whatever we do, we don’t like buying the market when it’s at an area of resistance. What we like to do is we would like to wait for the market to close above it. So ultimately, what we’re going to do is keep our eye on the NASDAQ. If we can close above resistance, which is basically 11050. If we can close above 11050, we’re going to expect a follow through, okay?
Now, the market will more than likely have a surge up. And then the markets going to more than likely retrace back down because markets form highs and lows at, on and around the same price points. Let me shut that off. Shut this off. Okay. So more than likely the merkets going to pull back, form a nice low price and then more than likely the market’s going to rally once again. So we’re going to have to make the decision here, do we buy or do we not, right? We’re not going to sell the market because the market momentum pushing up. So the last thing you want to do is really sell against the trend. You may say, “Yeah, but the market fell here. The market fell here.”
Look, when there’s a one way street, you usually drive in the direction of the sign with traffic, you don’t really try to drive against traffic. When the direction is up and you’re in the buy zone, the last thing you want to do is trade against traffic, right? Because ultimately you do incur losses or more losses than you would if you trade with the direction. So, if we close above 11050 we’re going to expect a surge. Were going to expect this weeks to be a bullish movement. If we cannot close above resistance, then we’re going to expect this market to fall right back down to the uptrend line, okay?
And then we’re going to expect the market to bounce back up. Ultimately, that will give us into the buying opportunity. So if we close above 110.50, we can look to buy it for the rest of the week and we’ll more than likely put on a Fibonacci and then really try to find the next. More than likely to get a 1000 ticks here, at least to cover the overall push. If not, it’s going to retrace. And then right around this area, we’re going to be looking for a buy. Now, why at that blue line? Well, because since March of this year, the markets been U-turning at, on and around the bottom blue level.
So it makes sense to buy it near the bottom blue level or look for that U-turn. Now ultimately, a lot of people get confused as if when they should buy when they should hold off. I have a really simple methodology. I use the monthly timeframe for direction and in this scenario direction is up. If the daily timeframe is in the buy zone, then I will ideally look for low prices and I’ll look for those areas of U-turn. If we are at a low price U- turning up or breaking through a U-turn level, I will then go to the one hour timeframe.
As long as the one hour time is in the buy zone, then really I’d just looked to buy because that’s momentum. So direction is up, we’re at resistance. If we can close above resistance, ideally I’ll go to this one hour timeframe. Here’s your one hour timeframe. Let me go ahead and mark your resistance for you. And you can see here that resistance level. You can write on it. So I don’t want to buy now, but as long as the market stays above this uptrend line and we’re above the pink line, I’m going to look to buy the market.
And because this area is the new angle that’s pushing the market up. Now, I’m confident with this because markets U-turned at, on and around the same price points and so this is what the market could realistically do. If it closed above resistance, it could push up, then it will pull back, okay? It’ll pull back. More than likely have resistance becoming support at the uptrend line. Counter-trend line break bullish on the way up, okay? And fingers crossed this will work. There we go. Like so. And so in my opinion, a really, really, really great buying trade would be, market closes above the pink level, 11050, market forms a high in the buy zone.
Market pulls back, hits the new uptrend line, hits the pink line, which is resistance now acting as support. You buy the market once, or if it closes above a counter-trend line. Closes above that counter-trend line, you buy the market. You can use tunnel trade along, you can use destination trade along, you can use [inaudible 00:13:10], you can use candlestick formations. You can use resistance [inaudible 00:13:13]. Basically, anything of your desire as long as you’re buying the market above 11050.
Joshua Martinez: Now, ultimately I am not a money manager. I’m not a CTA, so I can’t tell you to trade. But the research says and probability states that buying a counter-trend line break above 11050 is going to be the way to go. So once again, high-level. Monthly timeframe says we’re in a channel breakout. We have about a 4,000 tick rally. It’s nearly $20,000 with an E-Mini contract. The daily timeframe says we’re in the buy zone, making higher highs and higher lows. We just hit the area of support.
Joshua Martinez: The uptrend line has been acting as a U-turn level since March of this year. We’re at a area of resistance, 11050. If we can close above 11050, we should have a nice follow through of at least a thousand ticks. Now, you can try to take advantage of the first push or you can wait for the next wave and get a counter-trend line, break bullish, and then look to buy the market towards North. What do you think Josh?
Josh: Yeah, that’s-
Joshua Martinez: You think that’s a good plan?
Josh: That’s a good plan.
Joshua Martinez: Okay. Where would you place your stop? Let’s say this happens, let’s say you get an entry right around here, where would you place your stop?
Josh: So I’d place it at a previous low.
Joshua Martinez: Yeah. Real simple, everyone. Don’t complicate it. Here, this uptrend line, just place your stop in the sell zone, lower your investments. Maybe you’ll trade some Micros. You’ll get the risk relatively small. Whatever your risk is, times it by two. Here’s my methodology when it comes to trading. Even if your reward is just a little bit greater than your losses or your risks, as long as you’re winning more than half of your trades, then you should be good. Now why do I say that? Well, think about it. If you risk a dollar to make a dollar 10, you placed 10 trades, you win six out of the 10 trades, you’re making money. Ultimately, yeah, you could have a limit that’s two times, three times, five times your risk. That’s good. But that’s getting to position trading, swing trading, and you got to make sure you have the follow through and the ability to do that. For me, you can only buy, you can only sell, you get a 50/50% chance of being right or wrong.
If you just simply buy the market in the buy zone or sell the market in the sell zone, by default, in my opinion, you’re going to win more than half your trades. Outside of that, it’s just risk management. And I think if you can buy this low price in the buy zone at a known level U-turn and you risk a dollar and you make more than a dollar, you do that 10 times, I think you’re going to be really happy.
Joshua Martinez: Hey, everyone. It’s Joshua Martinez. I’ll see you next week. Do me a favor, let me know what your favorite entry strategy is. What do you like to use? Do you like to use candlestick formations, counter in line breaks, Fibonaccis. Do you like to use tunnel trader, do you like you [inaudible 00:16:03], do you like to use [inaudible 00:16:05]? What do you like to use? I find it pretty curious. And then I think most people also will take a look at the comments because they will more than likely want to see too, because I know there’s a lot of new traders that watch this video.
Joshua Martinez: Hey everyone, Josh Martinez, and I’ll see you next week.
