QQQ: Slightly more convincing than SPY
QQQ is slightly more convincing than SPY for a bounce. Let's get into it!
Disclaimer: Haven't actually traded QQQ in over a month. SPY, MSFT and TSLA were my jam recently, but I was reminded why I hate trading TSLA and am over it haha.
Where we are now:
- QQQ is slightly less oversold than SPY from a Z-Score perspective, resting at just -2.7 SDs away from its 1 year trading average.
- RSI is approaching oversold on most major timeframes including the weekly
- On the weekly chart, QQQ has bear flagged and broke down from this bear flag (see chart below):
- We have bullish divergence on the daily RSI and weekly RSI (however, I don't trust divergences as a rule)
- QQQ is setting up similar to how it setup between March 8th and March 30th. I used the EW tool to show you what I am seeing (but please note this isn't actually EW analysis, just using the tool to show you what I mean and how it could play out).
Where will we go:
- Tech has been hit pretty hard thus far, with QQQ falling roughly 35% from its high vs SPY which is around 24%.
- If you read my post on FAANG vs inflation or stocks in general vs Inflation, you will know that tech stocks tend to not be as harshly affected by high inflationary environments as others. In fact, stocks like TSLA and FB flourished during high inflationary periods. Take this with a grain of salt though, but it is kind of what the stats tell me based on life-time analysis of various stocks (I will like that idea below). However, we are currently in a unique circumstance of high inflation and an impending recession and so we have to be careful because I am actually not sure how a recession affects tech stocks, I have not done that type of analysis yet. But I would assume negatively just logically because decreased discretionary buying = less buying of tech.
- The setup is similar but not identical to March 8th. If we do actually go through with this, I do not expect a crazy bounce, I just expect a momentary relief bounce if any.
- Time series forecasting of the stock over the next 2 weeks shows that we could potentially hit 297 on a bounce within the next 7 to 8 trading days. When I map out the bounce that happened on March 8th using TV's bar tool, it interestingly ends right at 297..... kind of interesting, no? But not definitive!
- At the end of the day, time series forecasting puts QQQ as either hitting 297 or around 247 in the next 7 to 8 trading days. Its our job as traders to find which direction is the right one.
- Probability assessments actually favors a move to the upside here however.
- QQQ is sitting at -2.7 SDs away from its trading average. A bounce to -2.5 (a bounce of approx 0.2 SDs) would give a price of 280.45 and a bounce to -2 (approximately a 0.7 SD bounce) would give a price of 296.11.
Key Takeaways:
- Similar setup here as we had for the bounce that happened around March 8th of this year.
- Stock is oversold on both RSI and Z-Score but not to the same extent as SPY.
- A conservative bounce of 0.2 SDs would give us a price of 280.45, a more aggressive but still fairly conservative bounce of 0.7 SDs would give us a price of 296.11.
- Time series forecasting puts QQQ as potentially bouncing to 297 within the next 7 to 8 trading days. Inversely, if QQQ fails to bounce, it puts a price of 247 within the next 7 to 8 trading days assuming QQQ and the broader market capitulates to the selling pressure.
- Tuesday should give us sufficient information to make our determination of whether this is wanting a bounce or whether this just surrenders to the broader market fear and panic selling (an open and or close below 270 would be very bearish).
My thoughts!
Feel free to leave your comments/questions and or critiques below!
Enjoy the rest of your long weekend in the USA, and enjoy the rest of your short AF weekend to my fellow Canadians!
Disclaimer: Haven't actually traded QQQ in over a month. SPY, MSFT and TSLA were my jam recently, but I was reminded why I hate trading TSLA and am over it haha.
Where we are now:
- QQQ is slightly less oversold than SPY from a Z-Score perspective, resting at just -2.7 SDs away from its 1 year trading average.
- RSI is approaching oversold on most major timeframes including the weekly
- On the weekly chart, QQQ has bear flagged and broke down from this bear flag (see chart below):
- We have bullish divergence on the daily RSI and weekly RSI (however, I don't trust divergences as a rule)
- QQQ is setting up similar to how it setup between March 8th and March 30th. I used the EW tool to show you what I am seeing (but please note this isn't actually EW analysis, just using the tool to show you what I mean and how it could play out).
Where will we go:
- Tech has been hit pretty hard thus far, with QQQ falling roughly 35% from its high vs SPY which is around 24%.
- If you read my post on FAANG vs inflation or stocks in general vs Inflation, you will know that tech stocks tend to not be as harshly affected by high inflationary environments as others. In fact, stocks like TSLA and FB flourished during high inflationary periods. Take this with a grain of salt though, but it is kind of what the stats tell me based on life-time analysis of various stocks (I will like that idea below). However, we are currently in a unique circumstance of high inflation and an impending recession and so we have to be careful because I am actually not sure how a recession affects tech stocks, I have not done that type of analysis yet. But I would assume negatively just logically because decreased discretionary buying = less buying of tech.
- The setup is similar but not identical to March 8th. If we do actually go through with this, I do not expect a crazy bounce, I just expect a momentary relief bounce if any.
- Time series forecasting of the stock over the next 2 weeks shows that we could potentially hit 297 on a bounce within the next 7 to 8 trading days. When I map out the bounce that happened on March 8th using TV's bar tool, it interestingly ends right at 297..... kind of interesting, no? But not definitive!
- At the end of the day, time series forecasting puts QQQ as either hitting 297 or around 247 in the next 7 to 8 trading days. Its our job as traders to find which direction is the right one.
- Probability assessments actually favors a move to the upside here however.
- QQQ is sitting at -2.7 SDs away from its trading average. A bounce to -2.5 (a bounce of approx 0.2 SDs) would give a price of 280.45 and a bounce to -2 (approximately a 0.7 SD bounce) would give a price of 296.11.
Key Takeaways:
- Similar setup here as we had for the bounce that happened around March 8th of this year.
- Stock is oversold on both RSI and Z-Score but not to the same extent as SPY.
- A conservative bounce of 0.2 SDs would give us a price of 280.45, a more aggressive but still fairly conservative bounce of 0.7 SDs would give us a price of 296.11.
- Time series forecasting puts QQQ as potentially bouncing to 297 within the next 7 to 8 trading days. Inversely, if QQQ fails to bounce, it puts a price of 247 within the next 7 to 8 trading days assuming QQQ and the broader market capitulates to the selling pressure.
- Tuesday should give us sufficient information to make our determination of whether this is wanting a bounce or whether this just surrenders to the broader market fear and panic selling (an open and or close below 270 would be very bearish).
My thoughts!
Feel free to leave your comments/questions and or critiques below!
Enjoy the rest of your long weekend in the USA, and enjoy the rest of your short AF weekend to my fellow Canadians!
Premium indicators and content have launched! Get access at: www.patreon.com/steversteves
