Technical Analysis: SQQQ Faces Downward Pressure Amidst Volatility and Bearish Indicators

Technical Analysis of ProShares UltraPro Short QQQ (SQQQ)

ProShares UltraPro Short QQQ, trading under the ticker SQQQ, is an inverse exchange-traded fund (ETF) designed to return three times the inverse of the daily performance of the NASDAQ-100 Index. On December 11, 2023, SQQQ closed at $15.26, a decrease of 2.55% from its previous close. The fund's trading range for the day was $15.22 to $15.74, indicative of some volatility, with the price settling near its low point. The proximity to its year low of $15.22 suggests that SQQQ may be facing downward pressure.

The Relative Strength Index (RSI14) is at 43, which does not indicate an oversold or overbought condition but suggests a more neutral market sentiment towards SQQQ. The 50-day moving average is at $18.44, and the 200-day moving average stands at $23.12. Both these indicators show a significant downward trend since SQQQ is trading well below these averages. The Moving Average Convergence Divergence (MACD) is also in the negative territory at -1.39, reinforcing the bearish trend. The Average True Range (ATR) stands at 4.30, which indicates high daily volatility for a fund of its size.

There is no immediate support level since the fund is trading at its year low. Resistance is found at $17.28, which may impede potential near-term upward movement.

Fundamental Analysis of ProShares UltraPro Short QQQ (SQQQ)

Fundamentally, the nature of SQQQ as an inverse leveraged ETF means it inherently lacks a traditional earnings-based profile, so metrics like EPS and PE ratio are not applicable. Instead, the performance of SQQQ is fundamentally linked to the trajectory of the NASDAQ-100 index. With a market capitalization of approximately $3.68 billion and a high trading volume, SQQQ has liquidity and is able to facilitate substantial daily trades.

Given the inverse relationship to the NASDAQ-100, investors bullish on the technology sector may view SQQQ unfavorably, while those anticipating a market downturn in tech may find SQQQ attractive as a hedging tool or for short-term speculation. However, the extended downward trend in its price reflects the potential recovery or positive trends in the underlying NASDAQ-100 index.

Outlook and Evaluation

In predicting the stock performance for the next trading day, December 12, 2023, and for the upcoming week, one must consider external market conditions, overall investor sentiment, and the performance of the NASDAQ-100. Based on the technical indicators, there is a bearish sentiment surrounding SQQQ. However, technical rebounds can occur when a security is trading near its year-low levels.

For the upcoming week, much will hinge on broader market news, economic data releases, and any geopolitical events impacting the technology sector and the stock market at large. If positive sentiment returns to the NASDAQ-100, SQQQ will likely continue to decline. Conversely, a negative shift in sentiment or a market pullback could drive SQQQ's price higher.

Recommendation

Considering the present technical and fundamental factors, ProShares UltraPro Short QQQ (SQQQ) receives a rating of 'Hold.' This recommendation is based on the current market condition around the fund, which suggests that although there is a bearish trend, market volatility means the direction could quickly reverse. For investors currently holding SQQQ, it may be prudent to stay the course but closely monitor NASDAQ-100 performance. For others, entering a position in SQQQ should be aligned with their expectations for the broader market—specifically their outlook on the technology sector. Any investment in leveraged and inverse funds like SQQQ should be approached with caution due to their inherently risky and speculative nature.