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QQQ3 teeters on the brink

January 6, 2023

I have something which I call my three month rule. This usually applies when shares are in a strong uptrend. They surge higher, rest for three months and then take off again. No reason why it shouldn’t work on the downside as well and QQQ3 looks like a candidate. The shares have been bouncing around with a low close to $50 for the last three months. If they break down now expect them to move sharply lower.

I am well out of the money on my investment in QQQ3 but I don’t feel like buying yet when cheaper prices look so likely. It makes you realise that waiting patiently for buy signals is always a good strategy.

There is maybe a hint of what is going on with QQQ3 from the performance of FNGU (Microsectors FANG index 3x leveraged), which has been hammered during the bear phase. The FANG index is Facebook (Meta Platforms), Amazon, Netflix and Google (Alphabet). This ETF is down 92pc which shows what can happen? QQQ3 is down 82pc so another 10pc looks easily doable and would take the price down into the $20s. Other stocks that FNGU tracks are Apple, Alibaba, Baidu, Nvidia and Tesla.

Strategy

On my scoring system QQQ3 needs to be a 6/6 to be a buy. Since it tracks the Nasdaq 100, albeit with daily rebalancing, these two are bound to turn higher together so 3/3 for QQQ3 would be a buy signal. Presently it scores 0/3.

Further reading

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