$NQ: Bears Should Follow a Head and Shoulders Path

$NQ #NQ #trading setup

Yesterday I shared the Less Bullish scenario that argued that NQ made an important top. This is how that wave count looks after Tuesday decline:

Bears need to undercut that micro 17,221 support to confirm that NQ made an important top.

Any big bearish reversal normally follows the textbook Head and Shoulders pattern. In any real Head and Shoulders pattern the drop off the top of the Head always undercuts the neckline:

In our case the neckline is located at 17,221.

That scenario allows bulls to push NQ higher to test the double red line 17,780 – 17,800 before rolling over and starting a trip down targeting to undercut the neckline.

This bearish scenario should be considered as a reliable trade plan as long as bears hold NQ under 17,800, the Tuesday morning high.

Note that today NQ-mini stopped decline right at an important Gann’s level 17,587, a 360 degrees down off the high made on Monday.

The main paradox of the stock market is that a drop under an important support is normally followed by a strong pullback (that type of a bounce is often called the “dead cat bounce”).

There are two important levels of support in case NQ-mini follow that bearish scenario:

17,166, the upper edge of the unfilled gap up dated back to 19 Jan 2024, and
17,060, another Gann’s level, a 720 degrees down off the Monday high.

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