Editor's Note:

I am suggesting the average trader step to the sidelines. The markets remain very extended. This is not a great place to be launching new positions. The NASDAQ is likely to gap higher at the open tomorrow thanks to AAPL's earnings but where it goes from there is anyone's guess. Will the NASDAQ stretch its gains to 11 in a row? Maybe. But what about day 12? or day 13? Are you willing to bet on new bullish positions with the market looking this extended? Our new play on the QID is very aggressive and only nimble traders should give it a shot.


NEW BULLISH Plays

UltraShort QQQ - QID - close: 28.77 change: -0.37 stop: *see details*

Why We Like It:
The QID is the ultra-short ETF on the NASDAQ-100 index (NDX) and tries to simulate twice the inverse of the NDX's performance. The NASDAQ is up about 10 days in a row and looking very short-term overbought and due for a correction. I believe the AAPL earnings tonight will push the NDX higher on Wednesday morning but I expect the rally to fail. Imagine a blow-off top formation. Our challenge is entry point and stop loss. The NDX and the QID will like gap open with the NDX gapping higher and the QID gapping lower.

Here's the plan. Buy the QID at the open or shortly after the opening bell. It could see a big move in the first 15 to 30 minutes of trading. We'll set our stop loss at $2.00 below whatever our entry point is. We need to use a wide stop because the QID will see twice as much volatility as the NDX. We are essentially trying to call a short-term top in the market before it's even created. This is very, very aggressive and I suggest traders only use a very small position size (about 25% of normal). If we do see a reversal we can add to the position later. If you don't like trading through a crystal ball then don't make this trade. I'm trying to anticipate what might happen based on the market's extended rally and the AAPL earnings.

Annotated chart:

Entry on      July xx at $xx.xx <-- see TRIGGER  
Change since picked:     + 0.00   			
Earnings Date          00/00/00 
Average Daily Volume:        19 million 
Listed on  July 21, 2009