TQQQ: Hold Candidate with Strong Technical Indicators & High Volatility

Technical Analysis

ProShares UltraPro QQQ (TQQQ) closed at $62.94 on May 17, 2024, reflecting a slight decline of 0.22%. The day’s range was between $62.02 and $63.355, with a resistance level at $63.08 and support at $61.7. Trading volume was relatively low at 34.62 million compared to the average volume of 69.11 million.

TQQQ's RSI14 stands at 71, indicating overbought conditions. The ETF is trading well above its 50-day and 200-day moving averages of $58.40 and $48.38, respectively, suggesting a strong bullish trend in the short term. The MACD over the past three months is positive at 0.57, further confirming upward momentum.

The Average True Range (ATR) of 3.39 suggests moderate volatility. However, the stop-loss figure of $60.50 implies a potential downside risk.

Fundamental Analysis

TQQQ’s intrinsic value is challenging to ascertain due to its nature as a leveraged ETF with no direct EPS or PE ratio. The ETF leverages investments in the NASDAQ-100, aiming to multiply its daily performance by three. It has a market cap of approximately $18.99 billion and no earnings per share since it doesn't directly generate earnings.

The ETF has had a monumental run, transforming $10,000 into over $1.5 million since its inception, a testament to the power of leverage in a bull market. Yet, this leverage can equally amplify losses, making it a high-risk investment.

News pieces are mixed; one highlights incredible long-term returns, while another advises caution due to the risks associated with leveraged ETFs. This divergence captures the inherent volatility and potential of TQQQ.

Short-Term Prediction

For May 20, 2024, TQQQ may experience fluctuations around its immediate resistance at $63.08 and support at $61.7, influenced primarily by market sentiment toward the tech-heavy NASDAQ-100. The RSI suggests some pullback might be expected due to overbought conditions.

For the upcoming week, if market sentiment remains positive, TQQQ might test its year high of $64.2, given its bullish momentum. However, cautious investors may look for a potential correction considering its high RSI and the moderate ATR, suggesting volatility.

Long-Term Investment Potential

Given TQQQ’s strong historical performance but also its inherent risk due to leverage, it could be considered for strategic positions within highly risk-tolerant portfolios. Long-term potential remains tied to broader NASDAQ-100 performance. Thus, periods of sustained market correction can be detrimental due to the nature of leverage.

Overall Evaluation

Given the robust technical indicators and historical performance juxtaposed with inherent leveraged risks, TQQQ can be evaluated as a ‘Hold’ candidate. This categorization balances its ongoing bullish momentum with the cautious stance warranted by possible high volatility and overbought conditions. Those already invested might consider maintaining positions but monitor closely for potential pullbacks, while new investments may require careful timing considering the current overbought status.