The Nasdaq 100

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Three charts summarize the price action in the Nasdaq 100 ($NDX), the chart patterns in play, and the notable price levels. In terms of the $QQQ (the ETF that best tracks the $NDX), as many as four sessions during the last two weeks turned out to be '5 percent days'. A session is considered a '5 percent day' if its entire range is established during the first 60 minutes of trading. This phenomenon occurs only 5 percent of the time, thus the name. Needless to say, four occurrences within two weeks is high, but not uncommon.

The relevance of a '5 percent day' to a trader is as follows: within a couple of days of a '5 percent day' occurrence, look for price to break out of the established range in one direction or the other, and then trade in that direction. Of course, an experienced trader will want to reinforce this particular signal with other reliable indicators, such as trend, momentum, chart pattern, etc, in order to increase the odds of a successful trade. 

As shown in chart 1, The most recent '5 percent day' occurred just yesterday, and it had a range high of ~117.50. After the index 'gapped' higher on Tuesday morning, profit taking took hold for the better part of the day, with the obvious goal of retesting the ~117.50 breakout area. And so it did just a few minutes ago. 

Now to the pressing questions: 

1. Is today's move sustainable?
2. Does this move have a technical objective in mind? 

Chart 2 depicts an AB = CD harmonic pattern whose price target (aka. PRZ) is just above the supply line drawn across the July and November 2015 highs. This zone has got to be the technical objective, given that every attempt to sell the market in recent days has failed miserably.

How will it get there? Chart 3 provides an answer to this question. Clearly, what we have on hand is a potential Cup-and-Handle pattern. So, be on the lookout for a sustainable move above the TD Risk level associated with the TD Sequential 9-13 dating back to 8/12/2016. 

Chart 2. As many as '5 percent days' occurred during the last two weeks, most recently yesterday. Today, price gapped above yesterday's range at the open.

Chart 1. A supply line (resistance) is looming just ahead. The AB = CD's objective is 4865.

Chart 3. A Cup and Handle in the making.

Trade Smart,

Peter Ghostine (@peterghostine)

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