Few days ago NDX reached new highs. Most people think the market is still in a strong bull trend, but be cautious because a rare but VERY important signal has appeared.
The market is creating a rising wedge. This kind of pattern usually appears at the END of trends and can be the first signal of a neutral or bearish market.
Reaching new highs was such a bull signal for NDX and also broke the chart pattern. But when the price come back to the pattern so quickly, this is usually a FALSE break and is what most people call BULL TRAP.
A BULL TRAP is thought to let people buy at a very high price and then be forced to sell later, helping the market to fall further.
✅ When will the BULL TRAP be confirmed?
The bull trap will be confirmed in 2 steps.
1. If the price loses the blue trendline, breaking the pattern to the other side, this is a FIRST ALERT that the market is no longer bullish.
2. Breaking the previous support level (red dotted line) is another confirmation of the trend change.
💰 How to trade this chart pattern?
Be ready to start shorting with tight stops at each confirmation. This could easily move the market to the $18,000 zone, where there is high volume and previous supports.
Translated to money:
1. Use tight stop loss of 2-3% 2. Use a take profits of aprox 10%.
The returns are 4 to 5 times the risk, so enjoy the journey while risking such a small percentage.
🛡️ The risk management strategy
As we have done in so many previous ideas, remember you can split the position in 2.
If 50% of your position seeks for a 2-3% take profits you could easily enter a risk-free trade with the other 50%, where the stop loss is paid by the first order and you can potentially win a 10% or more.
Can't wait to see how the market behave this week!! Do you think we will see the market breaking down the pattern?
บันทึก
We've experienced a bearish day in the Nasdaq, yet the blue trendline remains intact. We'll continue to wait for market uncertainties to dissipate, allowing us to capitalize on the situation.