Bearish Trade Set-up for Tomorrow

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The chart above is QQQQ which is the Nasdaq 100 ETF. I had made a post a week or so ago suggesting that the unfilled gap down from Feb 17th may be a price target and potential resistance level for this rally. Today that gap was closed, and convincingly so. I feel that the odds of a nice bearish trade set-up are increased now and I will be willing to act on the next overbought signal from the short-term model. I believe that we will get that signal tomorrow morning due to the sustained strength today.

While I have not posted a chart for this, SPY is currently about 0.50 shy of filling the Feb 17th gap down at 82.74. So I would like to see price move up a bit tomorrow and then potentially enter a trade on SDS.

Click on Chart to Enlarge

This chart is a 90 minute chart of SPY about an hour before the close. I have shown a standard MACD below the chart because it looks like a bearish divergence is forming. There has not been a new bearish cross on the indicator yet, so it would be nice to see that occur tomorrow to help confirm a loss in momentum.

To simplify a potential trade entry on this.....

Place a "day only" limit order to buy SDS at 71.85 for tomorrow (Tuesday).

That order corresponds to the February lows in SDS (highs in SPY). In similar fashion to the limit order I suggested for the last trade on QLD, when looking at entering a trade with a limit order, I like to place them below a key support level in hopes that the market will "run the stops" and then immediately reverse giving a fantastic entry. That would require about a 2% gain tomorrow at some point to trigger the order. Depending on what things look like tomorrow I may change entry instructions for this trade.

Pete