Trade of the week: short Nasdaq 100

(Partial video transcript)

Previous EUR/USD trading outcome

Axel Rudolph: Hello and welcome to this week's "Trade of the week" on Monday 24th February, 2025. Now, let's get straight into things and let's look at our trades that we've had on for a couple of weeks. For the first one, it's EUR/USD. As you can see here, we went long about two weeks ago at $1.0326. So that one was pretty good.

And, as I said last week, you could have cashed in your profits there, if you wanted to, or do it again this week. Or just move your stop-loss to your entry level so it's a, hypothetically, free trade, which is on now. And, as you know, my longer term target, once we take out this high, the end of January high, which comes in on this Daily Financial Bet (DFB) at $1.0533, once we take that out, I believe we can go all the way up to $1.0750 or even higher. So, for me, there's further upside in store.

Previous USD/JPY trading outcome

Now, last week's "Trade of the week" was to go short USD/JPY, and we wanted to do so at ¥152.60. And we got within 17 ticks, but we didn't get into this trade, unfortunately. As you can see, it worked out really, really nicely. And we are now testing support going back to the lows of December but this one, it ran away from us. And these things sometimes happen.

Now, you could chase trades. I prefer not to do so, because if I do that, then I make my initial stop-loss bigger. And, if you tend to then do that, on average you will have bigger losses when you get it wrong. And that's not what I want to do. So, that one just went.

This week's trading opportunity

Now with regards to this week's "Trade of the week", it's a tricky one because, what we've seen last week were quite significant declines in US stock indices. And you can see here, the Nasdaq 100 dropping by over 2% on Friday as investors are getting increasingly concerned about the US economy and also about inflationary expectations going forward.

And this strong bearish candle to the downside is also not very bullish with regards to it having come after a high, which has made above the previous relative high, and all-time high, going back to the middle of December. And when you look at the Relative Strength Index (RSI), you can see that this latest high we made just last week, that was made at this top here for the RSI below the high made in December.

So, what we've got is negative divergence. In about 70% of cases it does point to a, at least short-term, reversal to the downside. This is exactly what we're seeing right now. But sometimes it leads to a more significant decline. So what I want to do is actually, this is a risky trade, so I'm just warning you here, but I want to sell into any short-term bounce in the Nasdaq 100.

And what I would like to do is do so at the middle of this Marubozu pattern. So the middle of this red candle from Friday is quite often acting as resistance. So, what I would like to do is probably short it around 21,860.

So, today's "Trade of the week" is to go short the Nasdaq 100, a risky trade because it's going against the main trend. But to do so around 21,870 with a stop-loss above last week's all-time record high at 22,241 and a downside target around the 20,700 area.