The set-up: With the market at all-time highs – record closes on the Dow Jones Industrial Average, the Standard & Poor’s 500, the Nasdaq Composite and the Russell 2000 for two days in a row – you might think there’s not much more room to run to the upside without a breather.

There’s no denying that things are getting extended across the board and there aren’t many good set-ups out there, but the market is the master and it tells us what it is going to do and right now it says the Nasdaq is making a fresh breakout.

The chart:

The chart shows a purely technical trade here – in fact, it could have been made Tuesday – with the Nasdaq breaking through 6,500. It measures up to 6,700 – and with the Relative Strength Index at reasonable levels, there is enough oomph to get it there — and the risk is back down to support at 6,400. That means you have up to 200 points on the upside, and 100 points on the downside, and that’s a risk-reward worth considering at a time when there aren’t many favorable opportunities.

The play: The PowerShares QQQ ETF (QQQ) is the obvious pick here – with stops set at the 6,400 level for the index — but you could also add some juice to this trade using your favorite leveraged ETF on the Q’s. My RagingBull colleague Jeff Bishop of favors the PowerShares UltraPro QQQ (TQQQ) for this kind of trade on the Nasdaq.


Jason Bond runs and is a swing trader of small-cap stocks.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of and the Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

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