QQQ has formed an ascending channel which may prove to be very lucrative for derivative trading. Utilizing Elliott Impulse and Correction Waves within the support and resistance lines, Wave 4 may dip as low as $392 which is a few dollars shy of a 61.8% Fibonacci retracement level.
Technical Indicators
A bearish RSI divergence has been present since the share price surpassed $400; the RSI highs retain a negative slope while the share price highs have a positive slope (both reflected in yellow). This supports the Elliott Wave Theory and ascending channel pattern as the share price is currently at, or soon approaching, the crest of Wave 3 as well as the ascending channel resistance line.
QQQ may experience a slight bump upwards indicated by the RSI line (green) which appears to be close to crossing the MA line (red) from beneath. However, due to its close proximity to overbought territory, I believe selling pressure will begin soon after as might be indicated by the MACD.
The MACD technical indicator shows a tightly wound MACD line (green) and Signal line (red). The MACD line is within dangerous territory of crossing its Signal line from above which is a bearish indicator and suggests an increase in selling pressure followed by a correction in share value.
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QQQ is within a developing ascending channel. A possible short-term recovery back to $435-440 is possible before the descent to the 4th Impulse Wave begins.
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My original projections were off but I still believe QQQ is undergoing an impulse wave and is still on track for a dip with an updated price target around $395. I annotated divergences within the MACD and RSI that support bearish signals.
Don't you think we are rallying back to 440-445 before Wave 4?
Shepherd_Investor
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@stewie795, It's always possible but the 1D chart leads me to believe that today's recovery is temporary. MACD crossed the signal line from above, RSI is still below the MA, and the price is rising on low volume. And lastly, most of the tech stocks that QQQ shadows are also signaling short-term bearish momentum (MSFT, AAPL, AMZN, etc).
@Trading_with_Greg, My question is what is going to cause the 5-10% pullback to the 400-415 range with momentum and ability to ignore all negative news. Hot inflation prints? Ignored. Higher 10Y yields? Ignored. China market issues? Ignored. Fed rate cut expectations pulled back? Ignored. We won't have earnings so everything until then is based off macro.
Right now growth is slowing but not enough to warrant concern. You see headlines of job cuts, but wage growth is at high levels and don't see it in claims. Inflation is staying stagnant but just off base effects, by Q3 it will be in the 2ish% range. Rate cutes will come mid year, and QT will taper down also.
So my question is what would cause the 7-10% pullback. Could be another 2017 with no pullbacks due to AI and soft landing exuberance.
Shepherd_Investor
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@stewie795 Yeah I’d be lying if I said I don’t sweat when I bet against the market. When I see a lot of bearish signals but the prices continue to rise, my first thought process is that institutional investors are squeezing as much profit as possible. Mainly they just aren’t selling which is contributing to the rally, not that they are buying.
My bread and butter is market psychology though. I’m expecting institutional investors to retreat around the next FOMC meeting in two weeks. If there’s a change in Fed Rates (good or bad) I believe the institutional investors will pull out and cause the pullback you’re referring to.
Check out my other idea “Potential Market Reversal” if you get the chance. I cover my thought process in more detail.