Sign InTech-Heavy ETF, TQQQ, Rides Bullish Wave Amid Short-Term Bearishness
Summary
ProShares UltraPro QQQ (TQQQ) is poised for a long-term bullish rally due to the overall appreciation of technology stocks, but short-term bearish signals indicate a potential mild pullback in the next trading day before a week of expected bullish movements, making it a Buy for short-term investors and a Hold for long-term investors who can manage the risks associated with high leverage ETFs. (Analysis conducted on September 1, 2023)
Fundamental Analysis
ProShares UltraPro QQQ (TQQQ) is a NASDAQ-listed ETF designed to triple the daily movement of QQQ, a popular tech-heavy ETF that tracks the Nasdaq 100 Index. Notably, over the year, there has been a significant overall appreciation of technology stocks.
As evidenced by recent news, strategies such as pairing shorts in TQQQ with shorts in SQQQ, an inverse ETF, have been suggested. This maneuver could tap into the annual decay rate of about 21.18% for potential returns of around 18%, assuming one can manage the risks involved.
Additionally, the elevated "puts to calls" ratio and optimism detected in NASDAQ newsletter writers' surveys hint at the end of a market correction and a possible rally over a duration of about four weeks.
Technical Analysis
As of September 01, 2023, TQQQ closed at $42.29, marking a marginal decline of $0.15 (-0.35%) from prior sessions. The ETF has been navigating between intraday highs and lows of $43.36 and $41.75 respectively. In the broader frame, it has ranged between a 52-week low of $16.10 and a high of $47.14.
The fund's 14-day Relative Strength Index (RSI) falls at 56, indicating that it is nearly neutrally positioned with a slight bias towards being overbought.
The 50-day Moving Average (MA) stands at $41.07, which is just below the current price, suggesting short-term upward momentum. The 200-day MA is $29.30, significantly below the current price indicating a longer-term uptrend.
However, the MACD exhibits a negative divergence of -2.07, implying short-term bearishness.
TQQQ's Average True Range (ATR) noted as 4.30, signifies volatility, with a stop-loss calculated at $41.01, just below the current price, which could mitigate potential losses.
Notably, the ETF's current support level stands at $40.19, and the resistance level is at $42.90.
Projection and Stock Rating
Based on the aforementioned technical indicators and fundamental analysis, TQQQ seems to be riding a bullish rally on a long-term basis. Despite short-term bearish signs indicated by the MACD, the ETF's performance is favorably poised to continue benefiting from the tech-stock appreciation.
Given short-term bearish signals, anyone trading this ETF could potentially realize gains from a looming rally suggested by the Puts to Calls ratio sentiment indicators.
However, considering the ETF's high leverage and volatility, only those who can bear high risk should consider this ETF.
For the next trading day, expected on September 05, 2023, given the proximity to the support level at $40.19 and the minor bearish trend indicated by the MACD, TQQQ's prices may experience a mild pullback.
Over the upcoming week, bullish movements could be expected. But the unpredictability imbued by TQQQ's high leverage could result in significant price swings.
Evaluation: Considering TQQQ's attributes, the ETF merits a categorization as "Buy" for short-term investors adept at managing high risks, while long-term investors should “Hold” given the inherent risks in high leverage ETFs. As always, it is advisable to continuously monitor the ETF's performance and market dynamics to ensure alignment with investment goals.
