With so much analysis last year that we will face an immediate market crash, NASDAQ turned higher from 10800 and started the Q1 of 2023 with a substantial gain in the first month and is reaching 13000 which is a strong upside long-term resistance. It also marks Fibonacci’s 38.2% retracement of a swing down from 0ctober 2021 to October 2022.
On the weekly NASDAQ chart, a breakout higher above the long-term falling channel is more visible along with a newly formed short-term upside channel, and we have a rejection from 13000 which can mark the end of this short-term swing higher and could lead to a pullback lower. The retreat can take us to the 11200-11500 downside resistance zone and a break below would invalidate the upside continuation higher above 13000. So if we do not get a confirmed break above 13000 in the short-term there will be no upside continuation.
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As the famous trader says…
Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.
Ed Seykota
How to trade this?
It is obvious that for Q1 2023, we have this upside resistance which should be broken for an upside continuation. This means that now short trade entries have some small advantage over the long trade entries as the overall trend is still down and it will be available for the long trade entries upon a break above 13000 which needs to be confirmed. You should open a short trade, not so big in size with a close stop loss order just above 13000 to target 11350. The risk to reward on this trade is almost 3.5 and the timing of the trade could be Monday NY session or Tuesday European session.
