NASDAQ-100 and QQQ About to Break Out of a 25-Day Long Flat Channel

The 25-day long flat channel between a high of $67.79 and a low of $66.17 in QQQ is a pattern that has never occurred before in that market. Based on the fact that volatility increased during the last 4 trading days, it is highly probable that there will be soon a break out of the flat channel.

QQQ_20130206

The ATR(14) has increased during the last 4 trading days from 1.01% to 1.11% of the closing price. I assign a subjective probability P[UP] of 65% for an up break versus a 35% probability P[DN] for a down break. These probabilities will be updated as new data come in to remove as much subjectivity as possible. Some other details of the pattern were analyzed in a previous post.

Also although I assign a probability of 35% for a down break, this is still high. However, this type of pattern presents traders with a unique opportunity for profits because usually a trend follows in either direction. False breakouts are always possible. The downside is more difficult because of the presence of the 200-day simple moving average and false breakouts can occur in that direction.

Disclosure: no relevant position at the time of this post and no plans to initiate any positions within the next 72 hours.. 

Charting program: Amibroker (Charts created with AmiBroker – advanced charting and technical analysis software. http://www.amibroker.com/”) 

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