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SQQQ (3 x SHORT QQQ ETF): Long Setup

60 minute time frame:

  • NDX has carved out a potential reversal pattern (Rising Wedge)
  • If the lower trend line of the assumed Rising Wedge is breached the wave (v) would have truncated
  • Given the size of the Rising Wedge, if it plays out, odds should favor a penetration of the S2 = 4435
  • If this is the case price could be heading towards the gap fill at 4287
  • The negative divergence of the hourly RSI strengthen the bearish pattern
  • Hence I am looking to implement a long setup in SQQQ (3 x Short QQQ ETF)

NDX 60-Minute Chart
Larger Image

Daily time frame:

  • Today's Doji, with the rebound off the 10 dma, is suggesting that the wedge is probably not done yet
  • Once the wedge is done we have three critical support layers to be watched for a potential bottom: S1 = 200 DMA; S2 = 50 dma; S3 = Gap fill at 4287
  • During the assumed pullback I do expect a higher low.

NDX Daily Chart
Larger Image

  • The RSI (14) is displaying a negative divergence. The loss of the trend line would confirm the reversal Pattern
  • The MACD so far has a new bearish signal cross

NDX Daily Momentum Chart
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  • Since the beginning of April NDX is showing relative weakness versus SPY

NDX versus SPY Chart

Therefore I think it is worthwhile to be prepared to open a long position in SQQQ ( 3 x Short QQQ ETF) if above 17.93 with an initial target T1 in the range of the 50 dma = 20.61 - Gap fill = 21.25

SQQQ D1 Chart
Larger Image

 

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