$NQ Trading Analysis12.1.23

I look at the daily/weekly charts on $NQ to give me the general trend for the week, but given I primarily scalp and daytrade, this is not my main focus. I focus on the hourly chart when I come into the day. The hourly chart gives me the best sense of which direction I should be taking trades for that day. I have a higher success rate on my trades if I stay in the direction of the hourly chart.

The $NQ and the market is certainly overextended. The move over the last 5 weeks has been powerful to say the least. At some point we will start to backfill some of the big gaps, but given the strength of this market I am less certain it will be sooner than later. That said, I am looking at the hourly chart below and am starting to see some signs of what could be a pullback. We have a big gap to fill to the 15,600 area which is about 400 points lower from the close on Friday. We tested the daily 8 EMA this week but failed to close below. The daily 21 EMA sits at around 15,730. I expect these levels to act as downside support and will target these areas on a pullback. The big question is when will the pullback come. For that, I look at the hourly chart below. We pierced the hourly 50 MA on Thursday and moved back to it finishing right on it Friday. The upside resistance is this past weeks high around 16,208. I'd be surprised if we zoom past this level, but we can certainly test it.

So, what am I looking for this week? Monday's have been pretty bullish all year. I wouldn't be surprised to see Monday move higher. If it does, my expectation is for a turnaround Tuesday. There is also the concept of the pit bull low, a trading phenomenon coined by Martin Schwartz. The basic concept is that the market will pull back on the Thursday or Friday the week before monthly options expiration. Given options expiration is December 15th, we could see some weakness towards the end of this week, which would seem to align with a need to consolidate/backfill the recent gains. That said, I am not wedding myself to any direction. The key to my trading is to focus on the tape and charts in front of me.