Sign InTQQQ Analysis: Volatility and Resistance Suggest Caution for Traders
Summary
ProShares UltraPro QQQ (TQQQ) is a leveraged ETF that aims to provide three times the daily performance of the NASDAQ-100 Index, and while its technical indicators suggest the possibility of moderate upward movement, the absence of support levels and high volatility indicate the need for caution and careful evaluation when making investment decisions. (October 26, 2023)
Fundamental Analysis
ProShares UltraPro QQQ (Ticker: TQQQ) is a leveraged ETF that aims to provide three times the daily performance of the NASDAQ-100 Index, trading on the NASDAQ exchange.
One observable feature in this current analysis is that TQQQ does not report earnings-per-share (EPS), nor does it have a price-earnings (PE) ratio. Furthermore, its market cap and the number of shares outstanding are listed as zero. These are typical characteristics of exchange-traded funds (ETFs), and hence traditional valuation metrics are not usually applicable to such funds. Instead, the fund is assessed based on its trending performance against its benchmark index.
The stock had a large volume of 158.74 million on the previous day, much higher than the average volume of 103.24 million. This amplified trading could signify increased investor interest.
Technical Analysis
On October 25, 2023, TQQQ closed at $32.77, a 7.32% decrease from the previous trading session. The firm's 52-week high and low are $47.14 and $16.10 respectively, signifying a substantial range of variability. The Relative Strength Index (RSI14), a momentum oscillator that measures the speed and change of price movements, is at 41. This suggests the stock is neither overbought nor oversold.
The 50-Day Moving Average of TQQQ is $38.15, while its 200-Day Moving Average is $32.56. The stock price is currently below the 50-Day Moving Average, generally indicating a bearish market trend. The Moving Average Convergence Divergence (MACD), a trend-following momentum indicator, stands at 0.078162, reflecting weak bullish momentum.
The Average True Range (ATR), which measures market volatility, is relatively high at 5.74. This might suggest potential price volatility in upcoming sessions.
The stock's resistance level, which is the price point that the stock price has difficulty exceeding, is identified as $35.62, suggesting that this could be a tough level for the stock to surpass in the near term.
Predictions
Given these technical indications, it will be challenging to predict the exact price for TQQQ on October 26, 2023, and for the upcoming week due to the absence of support levels and the high degree of volatility indicated by the ATR. However, the existing weak bullish momentum, the resistance level, and current price relative to the moving averages could imply a possibility of moderate upward movement providing it can breach the resistance level. But given the high ATR, one should also prepare for substantial price swings.
Evaluation
Under the current set of conditions and given the inherent risk associated with leveraged ETFs, it is advisable to exercise caution when making a decision to sell, hold, or buy TQQQ. New positions may want to consider the "Hold" option and watch for confirmations in price movement before deciding further. Existing holders may also consider the same or use this as a possible exit point if the portfolio risk tolerance is exceeded by the expected variance. Prospective buyers should pay careful attention to market trends, wait for a definite bullish signal, and consider their risk tolerance before deciding to buy. In summary, under current conditions, the TQQQ could be categorized as a "Hold."
