Light Volume Begets Shaky Levels

I suspect volume is going to be anemic Friday, and any range levels that I would have keyed in on for trading setups will be shaky at best. The lack of volume allows larger capital to push price past former key areas to run liquidity pools as stop losses, only to see the price reverse immediately after sucking up the liquidity.

The Nasdaq 100 has moved back to the range support of 1760 this week, and distribution pressure over the past several days has managed to keep the 1760-1820 range intact going into the holiday weekend. While 1760 technically should be the support, any break of this level on Friday will not be alarming.

More to this point, a break of 1760 should see a quick spike lower that can offer an intraday long setup for a return back to the former range. I would be less inclined to go to the "trade off of 1760" well too often. This range support has done very well over the past several weeks offering reversal setups.

However, I don't want to trust this level as much as I have in the last three weeks given what is to be a low-volume trading day. I would actually say forget Friday if you don't have a reason to do any trading. Low volume will typically make it harder to gauge entries, and possibly even gain entries.

If you must trade today, the setup that I would go after in the early session is to see how the half-hour range sets up. Ideally, a break of 1760 can create a liquidity crunch just under that level that pushes the index lower toward 1750. Entries with long exposure could be taken at this point looking for a return to 1760 or higher. Once reached, profit could be taken, and the long weekend should begin.

A move under 1745 on this idea would invalidate the setup and most likely cause a stop loss. If the index holds 1760 in the first half-hour of the day, I will not see any trade setups that I would be confident in taking from a high-probability standpoint.

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Chris Schumacher is a financial trader, speaker, writer, co-author of Techniques of Tape Reading and and contributor to TheStreet.com Short Advisor. He has delivered seminars throughout the U.S. and is a featured speaker at trading expos. He is a graduate of Ohio State University and has served as a guest lecturer at Ohio State University's Fisher College of Business as well as the Center for Entrepreneurship. While Schumacher cannot offer specific investment or trading advice, he appreciates your feedback; click here to send him an email.