QQQ Has Downside Risk To Its 200-Week Moving Average. Here’s A Trading Strategy.

The Invesco

IVZ
QQQ Trust ETF

QQQ
tracks the stocks in the Nasdaq 100. The daily chart shows that the ETF peaked at $408.71 on November 22, 2021, which was a key reversal day, as its close was below the prior business day’s low. The decline to its May 20 low of $280.21 totaled a bear market 31.4%. It’s been below its 200-day simple moving average since March 31, 2022. Without a value level below the market the downside is to the 200-week simple moving average at $261.33.

The Daily Chart for QQQ

The daily chart for QQQ shows that the index tracked its 50-day simple moving average higher until the beginning of 2022. Note that November 22, 2021 was a key reversal day. A new high was set with the close that day below the prior day’s low. This was the first warning that 2022 could begin with downside risk.

January 4, 2022 was another downside key reversal day. QQQ was below its 50-day SMA between January 4 and March 22.

The EFT closed below its 200-day SMA on January 20 and the 200-day then became a risky level that had a failed test on March 30. The decline to $280.21 on May 20 held a minor weekly value level at $279.90. This is the lowest horizontal line on the chart.

Note the death cross that formed on March 2 when the 50-day SMA declined below the 200-day SMA. This made a test of the 200-day SMA a selling opportunity, which occurred on March 29.

The highest horizontal line is the semiannual risky level at $385.74. The middle horizontal line is the annual pivot at $349.22.

The Weekly Chart for QQQ

The weekly chart for QQQ is negative but oversold. It’s below its five-week modified moving average at $312.39. It’s above its 200-week simple moving average or “reversion to the mean” at $261.34.

The 12x3x3 weekly slow stochastic reading is declining at 15.23. This measure scales between 00.00 and 100.00 where readings below 20.00 are oversold. If this reading falls below 15.00, QQQ will be “too cheap to ignore.”

Trading Strategy: Buy QQQ on weakness to the 200-week simple moving average at $261.34. Reduce holdings on strength to the annual pivot at $349.22.