3/17/2018 Weekly/Monthly Trends of the Major Indexes


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Let’s look at the weekly chart of QQQ to find some key levels. By weekly chart, what I mean is that each of the candles represents a week.

Weekly Chart of QQQ analysis 3_17_2018.PNG

In the chart above, the green line represents the 200 week SMA, the blue line represents the 50 week SMA, and the orange line represents the 20 week EMA. I’ve also drawn in parallel red lines, which show a trend channel. What’s neat is that the bottom part of the trend channel is almost identical to the 20 week EMA.

Notice that within the last two years (start of the trend channel), the body of the candles stayed within the channel for all but two of the weeks. The only two spots where there are temporary breaks of the channel appear in July of 2016, and February of 2018.

We are still in a bull market. So unless we see a weekly close below 160 on substantial volume (bottom of trend channel support), I would still look to go long on any dips. For your reference, the upper trend channel happens to be around 175.

Many people would be tempted to short sell QQQ when it reaches the top of the channel in anticipation that price comes back down to the bottom of the channel. Although this strategy is tempting and might work for you, I don’t trade this way anymore. Remember:

“The trend is your friend”

I’ve always wanted to be a contrarian trader since I wanted to feel special. If I could sell before the crowd, I could take money away from all the other traders and feel proud of myself. 

Key Takeaway: Trading to fulfill your ego is not the right way to make money trading! I’ve learned this the hard way in recent months.



Monthly Analysis of QQQ

QQQ analysis monthly chart 3_17_2018.PNG

Above are the monthly candles of QQQ. As you can see, the 20 month EMA is resting significantly higher than the 50 month SMA. This confirms a solid uptrend.

The key level to look for on a monthly time frame is the 140-145 level, which is represented by the 20 month EMA. If QQQ were to drop to this level, it would need to decline about 15%. This price range noted above represents a good long term buying opportunity.

Take a look at the orange line (20 month EMA). You can see that QQQ has bounced off that area all but one time in the last 15 years. The only exception is the financial crisis of 2008. The conclusion is that as long as QQQ stays above the blue moving average, and both the blue and orange moving averages are upward sloping, I would suggest to aggressively add to your long positions on any 10-15% corrections and holding for a few months.




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