T2W Trading Community

This article comprises several days worth of analysis of the NASDAQ 100 Index tracking stock (symbol: QQQQ), focused primarily on 60min charts, which sit in that sweet spot between day trading and longer term trading. We also use candlestick patterns, and there are abbreviated references to the major candlestick patterns throughout. An explanation of these is given at the end of the article.

Most of the commentary relates to the 60min timeframe. In reality, we favour (screen "real estate" permitting) tracking 15min, 60min and Daily (24h) charts for optimal awareness. Both the shorter and longer timeframes inform the core plot in different ways:

• Daily is useful for studying both specific patterns, as well as the overall trend within this timeframe, bearing in mind the majority of actively managed institutional money - i.e. mutual funds, hedge funds, very active pension funds - use the daily charts as a default timeframe for moving averages and key SR areas.
  
• The 15min chart is essential for fine-tuning entries, based on strong higher timeframe signals, as well as finding short term action points based principally on breakouts from minor SR. To a large extent the market will dictate the bias towards one timeframe or another. In a generous, wide ranging or trending market, the 60min/24hr pair come into their own, whilst a choppier environment requires more 15min/60min concurrent analysis.

As you read through this article, you should see a pattern emerging of what we look for & how we manage positions. We are looking for identifiable & recurring patterns & conservative action points.

Please note: For each time period discussed, the numbers within the commentary, shown as ( x ), relate to a corresponding point marked on the chart supplied.

Tues, 8th Feb 2005 - 15:00 GMT (QQQQ = 37.84)

Yesterday's strong recovery candle (8) – a bullish counter-attack for those of a candlestick orientation – was an important one; it held the retreat on QQQQ just above the still-rising 50MA, as well as cancelling out the prior down candle, which had breached the 20MA (a key level which needs to hold to keep the us in a Long Intermediate Term (IT) trade.

Despite this positive candle, we have dipped back through the 2nd Feb SR (5), although well supported by the key Bullish Engulfing Pattern (+BE) (6) as well as the pivot 4th Feb breakout intraday. As this is written, the first candle prints a pretty bullish pattern as the recent pullback is potentially taken out hastily. Watch for that action at the 37.91 level, as a breakout here on this pattern would reverberate around the trading floors: the Nasdaq is leaving its sick bed!

(click to enlarge)

Fri, 11th Feb 2005 - 15:47 GMT (QQQQ = 37.29)

New +BE on 60 min chart (12). SR at (11) obviously key. This thrust through 20MA came from nowhere and may unnerve those participants who are either short or flat the Nasdaq.

Mon, 14th Feb 2005 - 18:53 GMT (QQQQ = 37.86)

High Wave Candle (HWC) (13) at prior SR marked by the two Bearish Engulfing Pattern (–BE) has been followed by a series of upper shadows. Short term positions should close at 37.65, which would be confirming the short term rounding top we can see on the hourly char / IT / L position initiated from the Bullish Engulfing Pattern (+BE) (12) still looks comfortable here, despite the immediate SR barrier.

(click to enlarge)

Tue, 15th Feb 2005 - 15:18 GMT (QQQQ = 38.05) 

A clean breakout (14) on brisk volume to attack the window zone on the daily chart. IT/L still feels right, despite the Falling Window Resistance (–FWR) and –BE (daily) barrier immediately ahead.

(click to enlarge)