Weekly Update: Four Steps to Drawing a Channel
According to our technical analysis research, the Nasdaq 100 and S&P 500 futures markets are still within their daily down channels.
However, the Russell 2000 futures market has now formed a new up channel on its daily chart.
Why is that?
What did see that caused us to draw the new up channel for the Russell while the other indexes are in strong down channels?
That’s what we’re going to talk about today…
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Now, let’s cover the markets we’re watching this week…
As of today, Sept. 19, we are currently looking for opportunities in the following markets:
Nasdaq 100 Futures
The NQ monthly time frame is in an up trend. The market is making higher highs and higher lows. The market has an up Fibonacci with an extension above the market at price point 17867.50 about +22,860 ticks away. The market is at a low price hitting a known level of support. If support fails, it is expected the market will fall bearish towards the next level of support price point 8646.75 about -14,163 ticks below the market. It will be a good idea to turn to the daily time frame and look for a bullish or bearish trend to give the direction.
The NQ daily time frame is in a down channel. The market hit the top of the channel and is now trending bearish towards the bottom of the channel. There is a down Fibonacci with an extension price point 11571.00 about -1,323 ticks below the market. It will be a good idea to turn to the one hour time frame and look for high prices in the sell zone.
The NQ one hour time frame is in a downtrend. The market is moving from a low price towards a future high price. It will be a good idea to wait for the market to come near the down trend line before looking for selling ideas towards the daily down Fibonacci.
Entry: Counter trend line break bearish near the down trend line.
STOP: In the buy zone above the entry.
LIMIT: 11571.00
Once or if the market gives the entry, and as long as the market stays in the sell zone, it will be a good idea to turn to the five minute time frame and to look for Tunnel Trader short ideas towards the predicted price target.
S&P 500 Futures
The ES monthly time frame broke a major level of support and entered into the sell zone. After entering into the sell zone, the market pushed bullish right back into the buy zone. This is a sign of sideways movement or the sellers and the buyers fighting for control. It will be a good idea to turn to the daily time frame and to look for a trend. Either bullish or bearish to help decide who is in control.
The ES daily time frame is in a down trend. The market is making lower lows and lower highs. The market has a down Fibonacci with an extension price point 3609.00 about -1,174 ticks below the market. It will be a good idea to turn to the one hour time frame and to look for high prices in the sell zone.
The ES one hour time frame is in a down trend. The market is making lower lows and lower highs. There is a down Fibonacci with an extension price point 3792.25 about -447 ticks below the market.
Entry: Counter trend line break bearish in the sell zone.
STOP: Above the Fibonacci sequence. Ideally a sub Fibonacci forms to lower the risk.
LIMIT: 3792.25
Once or if the market provides the entry, and as long as the market stays in the sell zone, it will be a good idea to turn to the five minute time frame and to look for Tunnel Trader short towards the target price.
We are currently out of the following markets and waiting for entry opportunities:
Russell 2000 Futures
The RTY monthly time frame broke above the down trend line and pushed bullish. The market formed a high price then pulled back to the back side of the old down trend line. The market found support and is trying to push up. The market is finding resistance at 1905, which is keeping the market from pushing higher. The market has entered into a sideways range and is bouncing between the backside of the old down trend line and the future resistance level price point 1905.00. It will be a good idea to turn to the daily time frame and to look for a bullish or bearish trend to look for short term trading ideas. At this time, there is not enough information from the monthly time frame to determine long term direction.
The RTY daily time frame is in an up channel. The market is near the bottom of the channel. It will be a good idea to wait for the market to close above the short term down trend line before turning to the one hour time frame and looking for long ideas. If the daily time frame closes below the bottom of the channel, it will be a good idea to turn to the one hour time frame and to look for selling ideas in the sell zone.
At this time, the research says it is better to be out of the market wishing to be in versus being in the market and wishing to be out.
BTC Futures
The BTC monthly time frame is in a long term bullish trend. The market is moving from a high price towards a future low price. The market has a down gartley Fibonacci extension price point 10300 which is near the up trend line. If the market hits the down gartley Fibonacci extension. It is expected a bullish U-turn towards 76555 which is the Monthly up Fibonacci extension. It will be a good idea to turn to the daily time frame and to wait for the market to break the down daily trend line before looking for long ideas.
The BTC daily time frame is in a down trend. The market is making lower lows and lower highs. There is a down Fibonacci extension below the market price point 11060 about -1,629 ticks below the market.
I am out of the market waiting for the market to hit the down Fibonacci extension then will look for the bullish reversal towards the monthly Fibonacci extension.
Crude Oil Futures
The CL monthly time frame is in an up channel. The market is near the bottom of the channel showing signs of pushing bullish towards the top of the channel price point 147.27 about +6,355 ticks above the market. It will be a good idea to turn to the daily time frame and to look for low prices in the buy zone.
The CL daily time frame is in an up trend. The market is at a low price hitting the up trend line.
It will be a good idea to wait for the market to push bullish and close above the short term down trend line before looking for long ideas off the one hour time frame.
Performance Spotlight
The Russell 2000 (RTY) market is currently in an up channel on the daily chart.
Here’s what that looks like, with the up channel in blue…
On the other hand, here’s how we’ve drawn the down channel for the Nasdaq 100 (NQ) futures market…
While the RTY is still in an overall push to the downside, there are four key steps we took that led us to draw the new bullish channel.
#1: Breaking the Down Trend Line
The first thing we saw was a break of the longer term down trend line.
In the chart above, you can see that the RTY was able to break above the longer term down trend line (top of the red down channel), and it has stayed above it ever since.
#2: Setting a Higher High
The second thing we saw was the RTY setting a higher high in August versus the peak in early June.
This created two highs that we could connect to form the top of the new up channel, shown in blue in the chart above.
#3: Setting a Higher Low
Now, the RTY did pull back with the rest of the market from August through early September.
But unlike the NQ, the RTY market stayed above the top of the old down trend line.
In fact, the market came right back down to test that level again, where it held to form a higher low than the previous low in mid-June.
This higher low created two low points that we were able to connect to form the bottom of the new up channel.
#4: Counter Trend Line Break
Last but most important of all, we need to see a counter trend line break bullish in the buy zone.
As regular readers know, confirmation is key.
And we will only have confirmation of the new bullish up trend if we see a counter trend line break above the short term down trend line (dashed blue line in the chart above).
This short term down trend line was formed by the mid-August and late-August peaks and has yet to be meaningfully broken to the upside.
For now, the market is holding at the bottom of the up channel, but we’ll wait for confirmation before getting involved on the bullish side.
And if the market drops below the bottom of the channel, we’ll be happy to adjust and reevaluate the market once again.
Before You Go…
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Keep on trading,
Josh Martinez
Editor, Tunnel Trading Course
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