Elliott, TICK, and Momentum Divergences Create Power Trade in QQQQ

Apr 22, 2009: 12:23 PM CST

It’s rare when all of you indicators point in the same direction, but when it does, a powerful trade can open up.  I wanted to show you such a trade that just completed in the QQQQ:

Real quick, price formed a 5-wave Elliott Wave fractal into the intraday highs, but more importantly, notice it did so on a ‘screamingly obvious’ negative TICK and 3/10 Oscillator Momentum divergence.  Two doji candles and a shooting star candle formed as price began its ‘arc-roll’ to the downside, setting up a powerful short-sell trade with low risk and high odds.

The ‘scalp’ play was to target the 20 EMA but with so much confirmation, it was a better idea to play for a larger target – that of the rising 50 EMA.  With a hammer forming just beneath that level, that’s a decent sign to cinch your profits and go on to the next trade.

If the Elliott wave structure is correct, we could see a B wave up followed perhaps by a C wave down – but that’s not as important as learning the different methods of analysis that integrated to form a profitable, high probability/opportunity, low risk (stop just above the highs of the day) trade.  Take it one swing at a time and assess the structure as it develops piece by piece.

Corey Rosenbloom, CMT
Afraid to Trade.com

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2 Comments

2 Responses to “Elliott, TICK, and Momentum Divergences Create Power Trade in QQQQ”

  1. Manju Shekhar Says:

    Corey, Greetings. Just wondering , shouldn’t you be using the NASDAQ TICK, which is $TICKQ, instead of the NYSE $TICK for this example. Excellent discussion by the way.

  2. Corey Rosenbloom Says:

    Manju,

    Good point – I do keep the $TICKQ on the QQQQ but I wanted to highlight the divergence and the QQQQ showed it better than the SPY which I normally show and I was also in a hurry to post this as soon as possible so I used the NYSE TICK. Good call!