The Nasdaq 100 ETF (QQQ) was hit quite hard last week, but the ETF is making an attempt to firm on Monday and chartists should watch three things. First, the ETF gapped up and surged above 115. This gap was part of a 16% advance off the September low and QQQ was quite overbought in early November. The decline back to the 110 puts the ETF at the bottom of this gap zone and this is the last bastion of gap support. Second, the November decline retraced 38% of the prior advance. This Fibonacci number (.382) marks the minimum retracement expected on a pullback and also a potential reversal area. Third, the Stochastic Oscillator has become oversold with a move below 20. Short-term, it looks like QQQ could be setting up for a bounce and here's what to watch.
On the price chart, I will be looking to see if a doji forms today (Monday). This shows indecision that can foreshadow a short-term reversal. A gap up on Tuesday would provide the first sign of a price reversal. It is, however, vitally important that any gap holds. The second thing to watch for is an uptick in price momentum. The Stochastic Oscillator remains below its signal line and below 20. Look for a cross above the signal line and move above 20 to show an upturn in momentum.
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Thanks for tuning in and have a good day!
--Arthur Hill CMT
Plan your Trade and Trade your Plan
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