Sign InInvesco QQQ Trust Faces Uncertainty as Economic Indicators Hint at Impending Recession
Summary
On September 18, 2023, the predicted price for Invesco QQQ Trust (QQQ) is estimated to range between $367.93 and $374.39, with a recommendation to 'Hold' the stock due to overbought RSI and potential economic recession, despite positive momentum indicated by the MACD.
Fundamental Analysis
Invesco QQQ Trust (Ticker: QQQ), traded on the NASDAQ exchange, closed at $370.81 on September 15, 2023, reflecting a decrease of $6.46 (-1.71%). The Trust showed a market capitalisation of $145.77 billion and had 393.10 million shares outstanding.
The stock achieved a year's high and low at $387.98 and $254.26, respectively. QQQ's price earnings (PE) ratio stands at 30.24, suggesting it may be overvalued compared to the market average. However, the earning per share (EPS) at $12.26 indicates a company with strong profitability.
Furthermore, recent news suggests that several internet companies would potentially find success in AI investment as the AI investment thesis evolves. Moreover, Arm Holdings' successful debut on NASDAQ, drawing significant attention from retail traders, could herald further positivity for technology-oriented ETFs.
However, concerns are surfacing on the economic front, with strong indicators echoing likelihood of an impending recession in the next 12 months. This gloomy economic forecast may create a ripple effect of uncertainty on the stock market, including tech and AI ETFs.
Technical Analysis
The technical indicators show a decent short-term bullish trend, with the 50-day Moving Average at $372.90 slightly above the last closing price. Conversely, the longer-term trend as indicated by the 200-day Moving Average, priced at $326.12, shows QQQ as overpriced which might initiate a trend reversal towards this price.
The RSI 14 index is 58, which is closer to being overbought (above 70), suggesting a potential sell-off soon. However, the MACD (3-month) stands at 3.13, indicating positive momentum in the stock market.
The Average True Range (ATR) at ~1.41 reflects a lower volatility for QQQ, and with the Stop-loss determined at $358.57, it indicates a restricted downside risk.
Moreover, the stock's support and resistance levels are at $367.93 and $374.39, respectively. These figures will serve critical in determining price action for the coming trading day.
Price Prediction and Final Evaluation
Considering the above fundamental and technical analysis, the predicted price for QQQ on September 18, 2023, could oscillate between the support and resistance levels of $367.93 and $374.39.
For the upcoming week, while AI and tech ETFs are currently soaring, the overall expectations are guarded due to the bearish economic indications. The ETF might retrace towards the support levels or the 200-day moving average in the case of severe selling pressure.
Given the above, and considering the present economic signals, the recommendation would be to 'Hold' the QQQ stock. While the company financials are strong, the near overbought RSI and looming economic recession make it a risky proposition for new long-positioned investors. However, for existing investors, the sell-off is not recommended yet given the positive momentum indicated by the MACD.
