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The day of DIVERGENCE becomes the day for decisions

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In Friday's 03:00 EST update, I set up a scenario for trader's to be looking for potential divergence. Almost as if to script, the QQQ traded very similar to that outlined. Today was the "observation" and critical day where traders needed to look for divergence or similarity. As it plays out, today was divergence and I see some potentially painful mistakes taking place from bearish traders.

The word "potential" depends on the trade size that bears are implementing in the QQQ's ahead of tonight's earnings from Applied Materials (NASDAQ:AMAT) $26.72 +4.47%. It all goes back to Friday's 03:00 update and what could potentially unfold from today's DIVERGENCE.

NASDAQ-100 Trust (QQQ) Chart - Daily Interval

Today was the important observation day for my recently profiled bullish trades in the QQQ and the MARKET has answered with DIVERGENCE from the pattern identified in Friday's 03:00 update. Bears now should be assessing risk to the upper end of regression near $34.50 or the falling 50-day MA. I'd expect the QQQ to have a tough time getting above the $33 level today, but would expect any type of favorable news out of Applied Materials (AMAT) later tonight to have the QQQ reaching my bullish target range of $34- $35 should a positive report and guidance be given. To protect gains, I've been implementing a trailing stops and rolling of bullish position strategy in the QQQ's. Current stop on the QQQ's as adjusted this morning is $31.25. Earlier I was looking for a pullback to the $31.50 level for another bullish entry point, but the QQQ only achieved the $31.87 level.

Jeff Bailey
Senior Market Technician
Option Investor

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