Sign InProShares UltraPro Short QQQ (SQQQ) Faces Bearish Momentum Amidst Increasing Popularity of Inverse ETFs
Summary
On June 26, 2023, ProShares UltraPro Short QQQ (SQQQ) closed at $20.81, registering a 3.95% increase with below average volume, and its bearish momentum is indicated by trading below both its 50-day and 200-day moving averages, with a 3-month moving average convergence divergence (MACD) of -2.35, suggesting further bearish trend; however, the Relative Strength Index (RSI14) of 44 indicates the stock is neither overbought nor oversold, and recent news suggests an increase in the popularity of inverse ETFs as short-sellers increase their bets against US equities amidst fears of a potential tech-stock crash, but these ETFs carry significant risks and are typically seen as more volatile investments, and therefore, SQQQ is categorized as a Hold for investors with a high risk tolerance seeking potential short-term gains in a bearish market environment.
Technical Analysis
ProShares UltraPro Short QQQ (SQQQ) closed at $20.81 on June 26, 2023, registering an increase of 3.95% with a volume of 107.90 million shares, slightly lower than its average volume of 119.93 million shares. The stock is currently trading below both its 50-day moving average of $25.90 and its 200-day moving average of $40.53, indicating bearish momentum.
The Relative Strength Index (RSI14) of 44 suggests the stock is neither overbought nor oversold. The stock has experienced a year high of $69.55 and a year low of $18.73. The 3-month moving average convergence divergence (MACD) is -2.35, which also indicates a bearish trend.
Fundamental Analysis
SQQQ is an inverse ETF, which means it aims to provide returns that are opposite of the underlying index's performance. The ETF does not have a market cap, earnings per share (EPS), or price-to-earnings (PE) ratio since it is not a typical company stock.
Recent news suggests an increase in the popularity of inverse ETFs as short-sellers increase their bets against U.S. equities amidst a booming S&P 500 Index. Fears of a potential tech-stock crash have also emerged, and investors are bracing for the possibility. While inverse ETFs can make a lot of money in certain market conditions, they also carry significant risks and are typically seen as more volatile investments.
Price Predictions
Based on the technical indicators and recent news, SQQQ may continue to experience bearish momentum in the short term. The stock might face resistance at its 50-day moving average of $25.90. For the next trading day on June 27, 2023, the stock could potentially trade within the range of its last close's low and high prices, which are $19.65 and $20.84, respectively.
For the upcoming week, if the bearish momentum continues, the stock may test its year-low price level of $18.73. However, if the market sentiment shifts and news related to a potential tech-stock crash intensifies, SQQQ may reverse its trend and move towards its 50-day moving average.
Final Evaluation
Considering the recent news highlighting the potential domination of inverse ETFs in 2H23 and the ongoing concerns about a tech-stock crash, SQQQ may present an opportunity for investors looking for short-term gains in line with market reversals. However, this investment carries considerable risk due to the inherent volatility of inverse ETFs.
Given the current technical indicators and market sentiment, SQQQ is categorized as a Hold, suitable for investors with a high risk tolerance, seeking potential short-term gains in a bearish market environment.
