Trade of the week: short NASDAQ 100

We would place a stop and reverse order above the September high at 20,320; i.e. we would go long on a rise above 20,320, expecting new record highs to be made in this case.

(Partial video transcript)

Previous trading outcomes

Axel Rudolph: Hello and welcome to this week's "Trade of the week" on Monday the 7th of October 2024. Let's begin by having a look at our previous trades and the first one we did on the 9th of September, where we went short soybeans at around 1,020, I believe, and we had a wide stop on it because we weren't quite sure that this might actually have been the top.

And you can see here we were trading in the direction of the previous trend of this downtrend we've seen since May of this year and had a wide stop on there at 1,150, up there, simply because it was above the April low and above the July high. And, we made the right decision because basically, you can see here we did rally, towards 1,083 here at the end of September, but now we're starting to come off again and testing the current August-to-October uptrend line.

So you can see we're still short, up from our 1,020 area, so still underwater short. But now our stop loss level we could perhaps lower from 1,150 to just above, not the highs you have seen at the end of September, but the one slightly above that, the late July high at 1,089. So maybe lower you stop on that trade to 1,090, and see where it takes us over the coming days and weeks.

Last week, this trade worked out better as we went long the volatility index, the VIX. You can see here we did so around, I believe it was, 18.76. This horizontal line here. And we had a stop loss below the lows seen back in August. Now what we can do is either, because we are still in profit, raise our stop loss to our entry level - thereby we have a free trade on - and if we get stopped out at 18.76 or whatever (level) you got in, then fine, we don't lose any money. But if we continue to get it right and the VIX, increases further, then you could make money, on the upside. Or what you could do, if you want to still keep a stop, then maybe raise it to the late September low at 17.55 or so, just below there. So we've tightened our stops on this one as well.

This week's trading opportunity

And this week, what I would like to do is perhaps quite risky. But, I want to go against the grain. I want to sell the NASDAQ 100. I was hoping to do it, so, earlier this morning at 20,000. Right now, the market's already a bit lower, but I still want to sell it, with the idea being that we had really, really good, positive data out of the US jobs data and the NASDAQ rallied, but we didn't see any follow through today. So that could potentially mean that the sentiment is not as positive as people think.

So if you go short the NASDAQ , if I'm right, this could be a big ABC Elliott wave correction. And we could actually be heading all the way back down again towards the, the 17,100 area or so, or even lower going forward.

This week's "Trade of the week" is to go short the NASDAQ 100 around current levels, around 19,900, with the downside target around 17,100, and a stop and reverse order above last week's high at around 20,320.