Sign InProShares UltraPro QQQ: Technical Analysis Indicates Short-Term Bearishness but Long-Term Bullish Trend
Summary
The ProShares UltraPro QQQ (TQQQ) closed on August 16, 2023, at $37.85, with a short-term bearish trend indicated by the price being below the 50-day Moving Average, but a longer-term bullish trend suggested by the 200-day Moving Average, while the RSI14 suggests potential for an upward correction, and the negative MACD and high volatility support the short-term bearish sentiment; however, TQQQ has had a positive performance and increased investor interest in technologically inclined shares, so an upturn in the short-term is expected, making TQQQ a potential option for risk-tolerant investors looking for short-term gains. (Analysis date: August 17, 2023)
Technical Analysis
The ProShares UltraPro QQQ (Ticker: TQQQ) closed on August 16, 2023, at $37.85, marking a drop of $1.30 (-3.32%). This recent price was contained within a trading range between the day's low of $37.82 and the high of $39.42. Compared to the 50-day Moving Average at $40.96, the price is below this average, which could indicate a short-term bearishness. The story is drastically different when the 200-day Moving Average of $28.14 is used as a reference, which denotes a longer-term bullish trend.
The Relative Strength Index (RSI14) sits at 33, which could suggest that TQQQ is on the verge of being oversold. This leaves room for potential upward correction in the future, but this needs to be weighed against other factors.
The negative MACD (3-month) of -0.39 further supports the short-term bearish sentiment. There is quite a bit of volatility as suggested by the ATR of 4.76. Current support and resistance levels stand at $35.47 and $39.35, respectively. It is important to note how the stock behaves around these ranges in the near future.
Fundamental Analysis
TQQQ has had a positive performance with recent news noting a surge of over 50% in the ETF thanks to the rising preference in the NASDAQ 100 index and the rising trend of artificial intelligence across the market alongside the Nasdaq 100's surge by more than 40%. However, it should be noted that TQQQ is a 3x levered fund which amplifies daily movement, adding to its volatility.
The segment has seen an overall positive investor sentiment with exchange-traded equity funds recording the fourth straight weekly inflow tagged at $5.5 billion. Hence, despite the risky nature of TQQQ, the increased interest in technologically inclined shares justifies the increased acceptability of TQQQ.
Price Prediction and Investment Recommendation
Given the current market sentiment, an upturn can be expected in the short-term, possibly bringing the price closer to the resistance level of $39.35 on August 17, 2023. Over the forthcoming week, volatility is expected to continue, and some consolidation could occur. However, given the market's bullish sentiment, prices might continue to rise at a moderate pace.
In conclusion, TQQQ appears to be a risky asset due to its leveraging nature. However, the overall trend of the market suggests higher acceptability and positive outlook in the short-term. Hence, for risk-tolerant investors looking for potential short-term gain, buying TQQQ might be a suitable option. However, for more conservative investors, holding and observing the trend before making more calculated decisions may be the best choice. Therefore, TQQQ is classified as a "Hold."
