When I go through my charts every day, there are a lot of things that
I look for. Price is the most important of course, but momentum, moving
averages, relative strength and price patterns are just a few of the
other details that I try to focus on. The goal with all of this is to
find risk/reward opportunities where the reward potential is
exponentially greater than the risk involved.
This is why the Nasdaq Composite is such an easy short. Not because
trading is easy, but because the risk here is so well-defined, and the
reward possibilities are substantially greater. This is all that really
matters. Look at the new highs in February and into early March.
Momentum was nowhere near confirming them and now momentum is making
lower lows.
In my opinion, the big level here is 4250. This represents the highs
from January 22 that turned into support throughout the month of March.
As long as prices are below that, the Nasdaq Composite is a short all
day long. Above that and things get messy skewing the risk/reward ratio
away from being in favor of the bears.
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