The Invesco QQQ Trust Series 1 (QQQ - Get Report) traded above its 200-day simple moving average at $171.79 on Wednesday with my risky level for February at $174.44. This is the range within which traders and investors should reduce holdings. A key level within this range is $172.20 which is the price at which the ETF reaches the bull market threshold 20% above its Dec. 24 low of $143.46. While impressive, QQQ will still be 8.2% below its Oct. 1 high of $187.63. What this means is that a bear market rally can reach bull market territory and still be below the all-time intraday high. At the low, QQQ was in bear market territory.
Here's how my proprietary analytics work
Since each time horizon has differing severity of volatility, I focus on the last nine weekly, monthly, quarterly, semiannual and annual closes. A level below the period close is a value level at which to buy on weakness. A level above the period close is a risky level at which to reduce holdings on strength. A pivot is a prior value level or risky level that was violated during its time horizon. A pivot acts as a magnet and has a high probability of being tested at least once during its time period.
For QQQ, the close of $154.26 on Dec. 31 resulted in new monthly, quarterly, semiannual and annual closes. The close of $168.16 on Jan. 31 resulted in a new monthly level for February. The close of $168.56 on Feb. 8 resulted in this week's value level. I currently read it this way - My weekly value level is $161.70 with annual and semiannual pivots at $169.27 and $167.53, respectively, and my monthly and quarterly risky levels are at $174.44 and $192.04, respectively.
Daily Chart for QQQ
Courtesy of MetaStock Xenith
The decline that began from the all-time intraday high of $187.53 set on Oct. 1 confirmed a "death cross" for QQQ on Dec. 4 when the 50-day simple moving average fell below the 200-day simple moving average signaling that lower prices would follow. Under this bearish configuration, the guideline is to sell strength to the 200-day SMA, which was doable at $172.79 on Wednesday. This bearish formation was in play when QQQ set its Dec. 24 low at $143.46. At the Dec. 24 - Dec. 26 lows, I predicted that a bear market rally would begin. The close on Dec. 31 set the key levels described above. My semiannual and annual risky levels at $167.53 and $169.27, respectively, became pivots (or magnets) between Jan. 31 and Feb. 11. The close on Jan. 31 resulted in the monthly risky level for February at $174.44. As you can see, the 200-day simple moving average at $171.79 and the monthly risky level at $174.44 is the zone within which to reduce holdings to lock in a solid gain.
Weekly Chart for QQQ
Courtesy of MetaStock Xenith
The weekly chart for QQQs has been positive since the week of Jan. 11 justifying long positions. Today the ETF remains above its five-week modified moving average at $165.54. QQQ is well above its 200-week simple moving average or "reversion to the mean" at $135.70. The 12x3x3 weekly slow stochastic reading is projected to end this week rising to 69.43, up from 61.34 on Feb. 8. Note that as 2018 ended, this reading was below 20.00, which is an oversold reading.
Trading Strategy: Reduce holdings with QQQ between its 200-week SMA at $171.79 and its monthly risky level at $174.44. Remember that my annual and semiannual pivots at $169.26 and $167.53, respectively, are the first levels that need to hold on the downside.