QQQ (14 November)

The +/- 3% envelope with the 20d MA works well for mean-reversion strategies since it clearly shows inflection points where price may snap back toward the average

• How far is price from its 20d MA & is price near extremes of the 3% bands?
  
• Bollinger Bands adjust dynamically with volatility
  

Price rarely lives beyond ±3% of the 20d MA for long

• Bias is short when the 20d MA is falling & price is above the upper band
  
• Bias is long when the 20d MA is rising & price is below the lower band
  

After the April low at $402.39, the 20d MA's slope turned positive

• In strong uptrends, price stays between the 20d MA & the upper band & occasionally tags the upper band (June to October)
  
• In strong downtrends, price stays between the 20d MA & the lower band & occasionally tags the lower band
  

QQQ followed a solid trend from April to November's $637 high

• This marked a high probability risk of mean-reversion
  
• When QQQ hit the low around $588-$589, the 20d MA was still up around ~$610
  
• So we see a mirror-image on the downside stretch where the upside pushed beyond +3% & then a downside break beyond −3%, which is the kind of behavior that occurs when a strong trend finally exhausts - then corrects hard
  
• The move from ~$615-$637 was extended, so a good place to stop chasing longs
  
• The move from ~$615-$588 was also extended, so a good place to stop chasing shorts & expect a bounce back toward the 20d MA, which is exactly what's happening when QQQ bounced back toward ~$615
  

However, the current bounce is weak & is stretched relative to the bounce (+3.5% above the 20d MA, then −3.5% below the 20d MA, then back toward the 20d MA) - it's a full snap from upper to lower band & now a mean-reversion toward the 20d MA

• Either price reclaims the upper half of the channel & the trend resumes, or the 20d MA continues to rollover & any rallies the 20d MA/upper band are short entries which signals a trend change
  

The odds of another big push back to $637 without a reset are now lower & it's possible the trend now shifts from strong uptrend to corrective/trend down

• Price rebounded from below the lower band back near the 20d MA, but rallies from the lower band back to the 20d MA are often short entries, not buy-the-dip opportunities
  

This lines up with a $620 fail thesis

Treat rallies back toward the 20d MA/upper band as suspect unless the 20d MA turns decisively higher again

• If the 20d MA rolls over & price fails near $620, QQQ's near-term direction has changed from an uptrend to a downtrend