The Nasdaq: A Bullish Setup
This week, the indexes finally saw a tiny bit of a pullback. Instead of that pullback being a driver for a more profound retreat in the indexes, it only appears to be another buying opportunity in the direction of the trend. That trend is up.
The Nasdaq has mult-timeframe squeezes, already shifting higher and triggering to the upside. With that, I look to the core, mega-cap tech stocks to make the next leg higher.
Check out the setup in the Nasdaq futures below:
Nasdaq Futures: 195-minute Chart
Along with this setup in the Nasdaq, I have a setup in Google. My favorite bullish trading setups occur when the setup in the index aligns with the setup in the individual ticker. This is what leads to the best momentum!
Google: A Nested Squeeze
Nested squeezes are some of my favorite setups to trade. This is where we have multiple squeezes in a row!
Google: Weekly, 195-minute, 78-minute Charts
Do you see the highlighted sections? In Google, I can see that volume is shifting higher, which you can see in the TurboVZO down at the bottom of the chart. The squeezes are also consolidating on the 195-minute and 78-minute charts. With multi-timeframe squeezes like this, also known as nested squeezes, typically, one will fire, and cause the other to fire, sending the stock price higher with momentum.
With the Nasdaq and Google demonstrating the same setup, this is an even better setup.
Trading a Nested Squeeze
When trading a nested squeeze, or any directional setup, I use Fibonacci analysis, including Fibonacci retracements and extensions, aligned with areas of price resistance. In this instance, my upside targets are between $128-130. In this instance, bullish trades such as long calls could be used to first target the lower target at $128, or a butterfly could be used to target either zone. Sometimes I will stack butterflies where I will place one fly targeting the lower zone, and another fly targeting the higher zone, with different expiration series. This is so I can follow the ticker as it trades higher.
When You’re Wrong
With an idea like this, particularly when you’re combining a setup in an index and a sector, it’s a good idea to have a ‘when I’m wrong,’ spot in place. The first sign of being wrong would be if the Nasdaq reversed. It’s challenging for an individual stock to continue upward if the index fires in the opposite direction. So, if the Nasdaq ends up reversing and breaks lower, that would be a time in which I would be wrong about trading Google to $128-130. I would also be wrong if Google broke below support. Traders could either have a tight stop at $121, or a wider stop at the $120 price point. If the momentum fires to the downside, that would also be a time when I would get out.