QQQ currently is going through a clear A wave correction phase. This is after the 5 wave uptrend which started back in April. It is not possible to predict exactly when it will finish ABC move, before strating a new 5 wave uptrend. But, looking at all TA signals, here are two likely scenarios
Scenario 1 (see chart below): QQQ found bottom of wave A last week and now on its way to make a B wave bouce.
- QQQ closed at 458 last Thursday and this is the exact Fibonacci 50 retractment from the big 5 wave uptrend.
- QQQ is now on its way to 13 consecutive Tom Demark downtrend close, which is a fairly oversold condition.
- RSI 14 was 33 last Thursday. While still above 20, also showing sign of oversold condition
Assume B wave did start last Friday, we could expect this bounce to go back to 480-485, which represent 50% and 68% Fib bounce. After that, it is likely to start a C wave downtrend before it complete this correction
Scenario 2 (see chart below): QQQ continues to move lower before it starts B wave bounce. The most likely bottom would be around 435.
- This price level is 76% Fib retractment (which is pretty deep)
- It is also 200D EMA on daily chart, 50D EMA on weekly chart. as well as support area in March to April trading range.
- If QQQ does manage to go down here quickly, I expect a huge buying interest and extremely strong instituion support.
In this scenario, a B wave bounce from 435 could likely take QQQ back to 475 area.
QQQ plan for next week
- While scenario 1 is more likely, it is best to have a plan for both, especially given there are so many earning reports coming next week (Apple, Amazon, Meta, MSFT all next week, plus ARM, SMCI, etc)
- For Scenario 1, it is best to wait for QQQ to go to 480 and start to take profit (or buying hedge protection) on the way up, so you can be prepared for the upcoming C wave downtrend. Sinnce QQQ already bounced from 455 on Friday, it might be a bit risky to establish long position now to play for this upside. To confirm Scenario 1, QQQ can not go below 455 on daily chart, and need to close above 468
- If QQQ can not close above 468, and start to move below 455, it is likely that it will go through Scenario 2. In this case, it is best to start buying aggressively (TQQQ or short term call option) in 445-435 area. The probability of a strong B wave bouce is very high if QQQ quickly drops to 435.
- Finally, it is unlikely QQQ can go back straight up to ATH regardless it is scenario 1 or 2. Normally, stock will go through ABC wave, where C wave is another downtrend after B. In order for QQQ to go straight back up, we would need some extremely bullish earnign reports next week from big Techs. Do keep an eye on it but dont bet on that
