The Nasdaq 100 futures formed a bearish double top pattern on May 4th and reached its downside target on May 8th. However, it is now trading close to a major volume profile support zone on its continuation chart. On the daily chart, this support zone is based off volume between the most recent swing low on March 5th, 2021 and its April 29th, 2021 top. The range is from 12,979.00 to 12,777.75 with the point of control (POC) around 12,850.75. The mid-point of this zone is 12,878.50.
Further supporting this area is the 261/261 Fib extension from the double top pattern and the bearish ABCD pattern at 12,892.75. However, what makes this zone even more impressive is what you see on the weekly chart. It also contains a large volume profile cluster based on the date range from the March 2020 bottom and now. This range is between 13,047.00 and 12,635.50 with the POC roughly 12,741.75. This alone would be enough to take a long position, but there is even more support. We have May’s monthly S2 pivot at 12,694.25 and the upper end of the 34 EMA wave based off the high and close between 12,933.50 and 12,682.75.
I have established there’s strong support between 13,047.00 and 12,635.50 but any long positions should have stops below 12,609.75. That is a big range, so how do we narrow our risk down? First, we can narrow down the zone we would like to go long. I personally like using the 34 EMA wave based on the high, the mid-point of the volume profile, and the POC. If we take those prices, we have 12,933.50, 12,878.50, and 12,850.75. I would look for long entries at those 3 areas. You could use full sized Nasdaq futures, the micro futures, or options on QQQ. All would offer various risk tolerances. The most aggressive target would be the recent top at 14,064.00, but I would advise scaling out along the way if possible.
In summary, the Nasdaq 100 futures contract is approaching a potential buying opportunity with a favorable reward to risk ratio. It will be interesting to watch if prices fall inside this support zone. Look for continued updates on this set-up.