With a current six-day range of just 60 points, the NQ is likely to see expansion soon. The battle line to watch is 4179.75.
60-Point Range
The E-Mini NASDAQ 100 futures [CME: NQZ14] has traded within an extremely narrow range over the last six sessions, which implies significant expansion could soon be seen. How narrow is the range? The last six sessions have a net range of only 60 points, which is just 40% of its average of 148.50 points on a six-day range basis.
Typically speaking, anything less than 65% of average range usually leads to expansion, so watch the boundaries of the range closely heading into the rest of the week. Not only that, but anytime the price range shrinks less than 65% of its average range, the tendency is for the expansion to be 25% greater than average, which means we could see a move of about 185 points of range over the next six to ten sessions if expansion does indeed occur.
4179.75 is the Pivot to Watch
Bears have defended the previous week’s high price for six straight sessions now, which helps to identify the key battle line between bulls and bears at the moment. Additionally, this lets you know that there are plenty of buy stops that are growing above recent highs which, if triggered, could lead to one heck of a short squeeze to higher highs.
On the other hand, bulls have been defending the 4120 to 4130 zone for the same amount of time, meaning that the sell stops are certainly building below these levels, as well. This is exactly what you would expect when a range like this develops, as these stops eventually fuel the next wave of expansion once one side gets triggered.
Early acceptance, or rejection, of 4179.75 will provide directional bias heading into the remainder of the week, and into the rest of the month.
The Game Plan
NQ bears are looking to trap late bulls at or just above the previous week’s high price of 4179.75 for a shot at running downside sell stops through the previous week’s low of 4119.75 and into the 125% extended monthly ADR bear target at 4013.25 by the end of the month.
NQ bulls want to defend the previous week’s low at 4119.75 and want to overwhelm sellers at the previous week’s high price of 4179.75 for a shot at running upside buy stops into the 125% extended monthly bull target at 4309.25 by the end of the month.
Regardless of direction, the next phase of expansion could be significant, so watch the range closely.
Cheers!
Frank Ochoa
Author, Secrets of a Pivot Boss
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