After falling heavily last year, the tech-heavy Invesco QQQ Trust Series 1 (QQQ) bottomed out in October and started to form a base.
It tested that level twice and held it late last year. But as 2023 rolled in, QQQ shot out of the gates.
In less than a month, QQQ rocketed 20% higher before topping out in early February.
Since then, QQQ has been drifting lower. When we looked at QQQ on March 1, that pullback had put it right back at a key level.
After a quick 5% bounce, QQQ is under pressure again. So today, we’ll see what’s in store from here…
The chart below shows QQQ’s clear downtrend last year.
The longer-term 50-day moving average (MA – blue line) trended lower, and QQQ made a series of lower highs.
The next down legs after these peaks followed the 10-day MA (red line) bearishly crossing below the 50-day MA…
Invesco QQQ Trust Series 1 (QQQ)
But as we came into October, QQQ’s profile began to change.
QQQ retested and held its October lows in November and again in December. That enabled it to establish support (orange line).
This price action coincided with the 50-day MA also flattening out.
QQQ’s massive 20% January rally began with the Relative Strength Index (RSI) breaking higher from near oversold territory (lower grey dashed line).
This rally accelerated when the RSI broke through resistance and into the upper half of its range.
Adding to the bullish sentiment, the 10-day MA (red line) also broke back above the 50-day MA.
However, the RSI’s reversal (red circle) from overbought territory (upper grey dashed line) locked in QQQ’s February 2 high. It then saw it reverse lower.
Take another look at the chart…
Invesco QQQ Trust Series 1 (QQQ)
When we looked at QQQ on March 1 (red arrow), the RSI had fallen back to support. And it brought QQQ down with it.
QQQ managed a quick 5% bounce in just a few days. But the RSI reversed again and is bearishly tracking back in its lower range.
Now that the 10-day MA looks likely to break below the 50-day MA, QQQ is under even more pressure.
So what can we expect from here?
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Unless QQQ can regain some buying momentum, the RSI is going to track deeper into the lower part of its range. And that’ll likely continue to drag QQQ lower.
If the 10-day MA crosses below the 50-day MA, that would add to QQQ’s bearish sentiment.
However, negative sentiment doesn’t mean we can only trade QQQ from the short side.
As you can see on the chart, whenever the RSI forms a ‘V’ near oversold territory and climbs – QQQ rallies. I’ll be looking out for a similar pattern from here.
If the RSI bounces (even just from the oversold line to resistance), then that could provide the setup for a quick and profitable long trade.
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In today’s mailbag, One Ticker Trader members thank Larry for his service…
I initially bought the QQQ puts in at $4.09. The next day, I sold at $5.00 and made approximately 20%. The next day I bought back in at $4.40. I just sold at $5.30 and made another 20%. I enjoyed the roller coaster. Thanks Larry.
– William T.
Thank you for all the work you put in to help me be more successful.
– Peter P.
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