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The other major indices we analyzed are certainly worth keeping tabs on, which was the point of this exercise. That said, we saved the best scenario for last.
Nasdaq 100 Futures (/NQ) present a very attractive trade opportunity. Strength across the board in tech stocks and a parabolic move in AAPL have taken /NQ back to a very defined level of resistance at 2400. As highlighted by the gray ovals, this 2400 area has attracted sellers numberous times over the past year. Since we’re so close to the level, a bearish position is worth risking some capital on in our opinion.
To break it down, on the short side there is 30 points in upside risk (2405 stop to give it a little breathing room above 2400) and at least 75 points in downside potential (2300)…probably more like 125 points (2250). That makes for a worst case 2.5:1 reward to risk, and best case 4:1.
This scenario can be complimented with something like a QQQ Feb12 59/60 Bear Call Spread, which is currently selling for around 0.45 credit. There are plenty of bearish Options strategies that would fit this scenario, just use your brain and analysis tool to get in the one that you’re most comfortable with if you like this setup.
Given the overall market strength and bullish looking setups in the S&P and Russell, it would not surprise us if they drag the Nasdaq higher through 2400 resistance. Regardless, the Trader in us must play a set up like this and we intend to send a trade alert to TickerTank Members tomorrow!