Wednesday, March 26, 2014

Why is the Nasdaq Such an Easy Short Here?

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.
3-24-2014 COMPQ daily
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.  (more)
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