Ripe Conditions for A Short Squeeze

Nasdaq futures are up heading into Thursday’s trade. The session featured 2-way trade along the upper quadrant of yesterday’s range before buyers came and pushed price about half way into the Friday print. Volume is coming in just a touch below 3^rd sigma, a normalization of sorts, while range is still extreme. At 8:30am GDP data came out better than expected while Personal Consumption stats were in line with expectations. Initial/Continuing Jobless claims (also dropped at 8:30am) was mixed. Third reaction analysis yields a buy after the data.

Also on the agenda today we have Pending Home Sales at 10am.

Yesterday we printed a neutral extreme up day. This print came on the tails of a neutral extreme down day. The neutral extreme day carries the 3^rd highest amount of directional conviction behind the trend day and double distribution trend day. That means sellers carried a high expectation Tuesday afternoon of seeing lower prices. When instead price went gap up yesterday, then neutral extreme up, it created conditions for a short squeeze.

Heading into today, my primary expectation is for a short covering rally initially off the open, buyers pushing higher. Look for price to take out overnight high 4287.75 and target 4300. Then look for sellers to work back in and 2 way trade to ensue.

Hypo 2 the short squeeze triggers real, initiative buying which carries price higher, up to 4342.25. Then sellers come in.

Hypo 3 sellers work into the overnight inventory to take out overnight low 4205.25 and test the odd LVN at 4200. Buyers defend here and 2-way trade ensues south of 4250.

Hypo 4 sellers push down through the odd LVN at 4200 and liquidate down the zipper to target 4130.25.

Levels:

If you enjoy the content at iBankCoin, please follow us on Twitter