NQ completed a corrective Expanding Triangle on Tuesday:
The “Expanding Triangle” pattern is widely known as “Megaphone” or Broadening Formation/Consolidation. It is composed of five subwaves a-b-c-d-e where every new move is larger than the preceding one. The pattern gets concluded with the largest move up, a strong short covering rally that creates a bulls trap and make bears through in towels and cover shorts.
One rule you should always remember about triangle shaped consolidation is that price enters and leaves that pattern in one direction. It’s so called a continuation pattern. In case of the Bearish Triangle, it starts after a strong decline, when the market gets oversold. Then price jumps up and down. In the process trader accommodate to new lower price levels and the majority gets misoriented by that directionless whipsaw.
Note that price spiked over resistance 11,600 but that move got faded by bears. That move up over a resistance followed by a quick a push back under that level triggers the “failed breakout” short setup.
As long as bears hold NQ under 11,660 they have an active short setup to push NQ lower. If bulls manage to push NQ over 11,675, the high made on Tuesday that attractive short trading setup would get invalidated.