Nasdaq - Overbought/Oversold System

For this trade, we use two charts.

The first is NCTW, which shows the percentage of stocks in the Nasdaq Composite trading above their 20-day EMA. We’ve backtested this signal back to 2018 (the earliest data available on TradingView), and the results have been very strong, with performance annualising at around 35%. We’ll run a full system review in FoundryStrat – Builder.

When NCTW closes below 25, it means that 75% of Nasdaq Composite stocks are trading below their 20-day moving averages. This represents an oversold condition and is our signal to look for a long in the Nasdaq.

Next, move to the Nasdaq price chart. The entry is triggered by buying the break above the following day’s candle. We want to see confirmation through strength and positive follow-through in price action, rather than blindly buying the signal.

• Stop-loss: Set at the new low that has been created.

• Risk filter: I do not take the trade if the stop distance exceeds 5%

• Trigger: If a buy isn't triggered on the following, day, you can keep rolling the signal - but maintain the stop at the newly created low.

Once NCTW recovers to 75, we begin to trail the stop using the Nasdaq’s 20-day EMA, allowing the trend to develop while managing downside risk.