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Day traders! Give me 5-minutes of your time

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In Friday afternoon's 03:00 EST update I talked about a trading scenario in the QQQ's based on a short-term pattern than may unfold today and tomorrow. So far, we're seeing almost duplicate action to what was pointed out. Tomorrow becomes the "swing day."

Late Friday, in the market monitor, I profiled a bullish trade in the NASDAQ-100 Trust (AMEX:QQQ) $30.53 +3.2% from the $29.67 level and bulls are looking at some shorter-term charts, specifically the 5-minute interval charts.

In the past we've talked about the "heavy weight" in the QQQ's being Microsoft (MSFT) and how that stock's price action can influence the QQQ's. Let's take a quick look at the QQQ on a 5- minute scale to better understand how MSFT may be of help going forward.

NASDAQ-100 Trust (QQQ) Chart - 5-minute interval

It takes 100 stocks to make the QQQ move, but MSFT is the largest weighted by far. We constantly stress how traders can and should understand how the price action of just a few stocks can really impact the Q's. Today, a short-term trader monitoring the 5- minute chart has seen two hurdles cleared toward their goal of $32, where we might see some type of short-squeeze put on.

Microsoft Chart - 5-minute interval

Friday's close right near the $50 level in MSFT may have been a very good level to see some psychological support and create an upward bias to the stock today. We see that MSFT "lags" just a bit from the QQQ's, but similarities on the 5-minute chart can be found. It took MSFT about 20-minutes of trading to break above trend and that correlates nicely with the QQQ push above the $30 mark. To manage a bullish trade in the QQQ from here, a bull wants to see the 50-pd MA in MSFT stay intact as support. All the while monitoring the various "hurdles" from the mid-point of regression and 200-pd MA as potential resistance. If the $52 level in MSFT are cleared, then the stage is set for MSFT to perhaps rally to the $54-$55 level.

Whether you're a short-term day trader in the QQQ or a swing- trader, trade setups using both are important. The two combined give the trader the opportunity to lay out scenarios, then plan a trade around the scenario. Once the trade is implemented, the trading plan is followed and monitored going forward.

Jeff Bailey
Senior Market Technician
Option Investor

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