Because we were looking for a non-trending day, we would then look for a trend reversal. A break below Tuesday's low without any follow-through to the downside near 11:00 am confirmed a non-trending type of day, and provided us with the first clue that the trend reversal was in the cards. Our trade strategy was to look for an exit on our short trade, and then look to enter long on a pullback down. Our first target was a test of the morning high or higher high above morning high. We got the first target at the end of the day.
On an intraday basis, looking at 5 or 15 minute chart, NQ's price decline from Tuesday's swing high is still indicating a typical wave 4 retracement pattern, a choppy ABC Zig Zag down. The very shallow retracement so far, indicates two possibilities:
First, if wave 4 is complete, a shallow retracement is an indication that wave 5 would likely be a strong wave. Second, if wave 4 is not complete, we may get a down day tomorrow, with price dropping down below today's low towards the .382 - .50 retracement area (see attached chart).
Note: Wave 4 usually retraces between .382 - .50 % of wave 3. Anything less is an indication of a potentially strong wave 5.
