Nasdaq Triangles: Bullish Or Bearish?

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

NQ, 2009

NQ, 2012

NQ, 2014

NQ, 2015

Bearish Break Downs

NQ, 2000

NQ, 2006

NQ, 2008

Conclusions

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.

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