The /NQ futures continuous chart hit a couple of key levels and bounced off them Tuesday.
#1 – 6547.50
This is an AB=CD measured move taking the down move off the all-time high to the swing low made on October 11th (6907.75), and projecting the length of that swing from the retracement high on October 17th (7368.50).
A second measured move lower based off the 7368.50 swing high down to 6580.50 swing low, and projected off the 7231 retracement high comes in at 6443, just 6.50 points beneath Tuesday’s low.
#2 – 6468.36 (really .25 because futures don’t trade in non-quarter levels)
This level completed a bullish fibonacci bat pattern on both daily and weekly charts.
This pattern began way back with the low made on April 4th (our X-point). The leg goes up to the all-time high 7728.75 (A-point).
Then price made a slightly greater than 50% retracement, but not touching the 61.8% level, giving us our B-point at 6907.75.
Price then retraced a little more than 50% again (fractals!) to give us a C-point at 7368.50.
The pattern completed at the 88.6% retracement of the entire X-to-A leg, giving us a D-point at 6468.86 (.75 really because quarters).
There are a number of ways to trade this type of pattern. The way I was taught is IF this is in your trade plan, THEN enter at the 88.6% level, place a stop at the 1.13% (i.e. 13% of the X-to-A leg length beneath the X-point), with target one at the 38.2% retracement of the A-to-D range, and target #2 at 61.8% of A-to-D range.
Over multiple underlyings, this pattern generally has a win rate of hitting target #1 a little better than 58% of the time.
From a pure price action perspective, we have a prior structure low zone on the daily chart down between 6412.25-6306.75 (lowest close into the April 4th swing low to the low). So we certainly could see a further downside push before a push back up on a more favorable risk-reward basis.
Of course all of this goes out the window should Dennis Gartman say he’s long of tech in the coming days.