- Markets dip as the fed meeting cools bullish sentiment
- NQ has been stuck in a range and how traders can capitalize on it
- Bullish and Bearish targets if a breakout occurs
Fed Signals Further Rate Increases
It’s very obvious from yesterday’s Fed meeting that the FOMC will not stop until they have reached their target of 2% inflation. At least the aggressive rate hikes seem to be off the cards and we shouldn’t see any 75 basis point hikes in 2023. Equity markets responded negatively and we saw NQ sell off over 5% from the high it made on Tuesday. That candle closed forming a bearish Lightsaber candlestick, to learn more about the lightsaber, go here.
We are still focusing our attention on the range between $12,075 and $11,496.75. As we mentioned in Monday’s analysis. We saw a breakout occur and NQ rallied to a high of $12,339.50 after the better-than-expected CPI report, however, the Fed’s comments sent the market right back down into our range and we have been sitting there since November 10th.
Potential Trade Setups
There are a few ways traders can capitalize on the current market conditions but we must be aware that volatility could continue as the market digests the Fed’s comments.
The range-bound zone mentioned above gives traders an opportunity for high-risk/reward setups as they can initiate long positions at the bottom of the range with stops just below and vice versa at the top of the range. Ultimately, it’s a game of probabilities and we are not trying to find the perfect setup but just looking at what could potentially yield the greatest return. It’s just a matter of time before the price breaks out of the range but it’s the trader’s intention to take advantage of the pattern while it continues to consolidate within.
If traders interpret the Fed comments as bullish and wish to go long, a break out above the $12,075 level could lead to a move up to $12,658.50 which is just the measurement of the range extended above.
If the market interprets the Fed comments as bearish, then a break below $11,496.75 could lead to a move lower toward the $10,919.75 level. From there, NQ would only be 4% away from yearly lows which could lead to further bearish action into the start of 2023.
With inflation coming in better than expected and the signal from the Fed that interest rates may not be as aggressive next year, markets are mixed on their outlook. It will be interesting to see how the comments from the Feds meeting will be digested into the later part of this week.
With NQ stuck within a tight range, the coil is being wound tightly and the longer it goes on, the bigger the potential move will be once a breakout does occur.