Nasdaq has formed a very pronounced triangle during the last several months. I decided to review the history of NQ futures index to identify all of the triangles during the last 20 years. Let’s see what I learned from this research.
The chart of our current Nasdaq triangle is shown below.
NQ, daily, 2019
When reviewing this chart, I decided to ask myself the following questions:
- Historically speaking, should I expect this triangle to break out or break down?
- If the index breaks into a certain direction, how likely is the fake out?
Let’s review all of the examples that I found when analyzing the last 20 years of Nasdaq price action. My conclusions are presented below these charts.
Bullish Break Outs
Bearish Break Downs
Several observations that I can draw from this analysis:
- None of the historical triangles are exactly the same. Each was developed in its own time, environment, sentiment and fundamental context
- There are triangles with both bullish and bearish resolutions, which is not surprising since we had 2 bear markets and 2 bull markets during the last 20 years
- Fake reversals are rare. In most cases, the price continued to trend in the direction of a break out / down.
The bull-bear fight is on. Eventually, one camp will prevail.