I didn’t realize how long it had been since I last charted the QQQQ until a reader asked me to chart it again. I’m glad I did, because this is an interesting chart. Originally I thought this week would show just another trend line acting as a ceiling soon, but then I revised my moving average to include the 100 and 200 day sma (simple moving average) and saw the QQQQ was caught in between the two longer term moving averages.
The trend lines are worth some attention though. I like seeing three lines in an ascent rather than in a decline. Both the lows and the highs are continuing to reach new near term highs and even when I take out some of the extreme points and draw a trend line more through the middle I see a positive outlook. The middle line could act as support and keep the QQQQ above 46. If that breaks (and I think it will), the next line of support is just barely above 44 and could reach 45 by the time the QQQQ comes back down again.
I drew the horizontal line at 50 where the first three days of trading this year kissed against, as a floor twice and then as a ceiling before taking a dive. Whenever we get back up there I don’t see us shooting through it before taking a deep breath. Then I’d think after breaking it we’ll retest before really getting to newer highs. But I’m getting ahead of myself. I didn’t draw the line around 42 where most of this year’s bottoms found support, but maybe I should have to emphasize the sideways channel we’re still trading in.
Back to the moving averages – The top trend line is at 48 which happens to be where the 200 day sma is. That could pose a tough challenge for the QQQQ this week. Getting above 48 and closing above it for two days in a row would be a bullish sign. Bonking and not passing the 200 day sma on the first try isn’t necessarily the end of the world though. The QQQQ is above the 100 day sma for the first time for a full week this year. That’s certainly bullish.
If I can manage the time during the day this week, I’m going to have to consider buying a small quantity of options on the QQQQ as a day trade. If it hits 48, the return to 46.50 could be quick and buying a May 46 or 47 strike could be a nice percentage gain. I’m not willing to use big dollar amounts for this trade, but have to consider putting some money on the line for it. The same goes for the other direction. If the QQQQ hits 46 and really even more so if it hits 44.50-45, buying near term calls at 47-48 could be another good quick trade.
looking at a weekly chart the volume has been going down every week since the rally started 5 weeks ago,rsi is @ 60 and we haven’t see a sell the news yet,Whats your take on the PPT (Paulson Plunge proction Team, Fact or Fiction ?
Thanks. I’m at a loss anymore what direction the market will take, but your chart analysis is very reasonable citing back and forth movement near term. Only hardened bears are long term bearish i guess. anyway, no trading to report for a bit. once my current position is resolved (May expiry) i will follow DAY trading only—basically trying to scalp. if i’ve finally learned to cut losses short and try again the next day, i’ll be ok. appreciate your time on this chart.
@ Redvettes – PPT sounds real to me. It wouldn’t surprise me if something like this was going on behind closed doors. That’s probably why Hank got the job in the first place. His ties to Wall Street solidify the PPT a little more. Here’s a link from 2006 that explains PPT a little more.
@ Kadena – I hope I helped.
People who don’t think the government is involved or wants to be more involved in everything are like the ostriches with heads in the sand. Unbelievable what the government undertakes sometimes. Wish i had ‘plunge protection’!