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NASDAQ-100 Index Tracking stock (QQQ) - Jan/Feb 2001

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One thing I like to do from time to time is look back on history and try to see if current technicals in an index are similar to that of the past. The above chart dates back to January and February of this year when the QQQs had similar technical of those found today on the 60-minute chart. I've highlighted the above chart with point (A) where a short may have been initiated when the NDX broke below its 50-period MA. A stop would have immediately been put just above 100% retracement. Points (B) at the 38.2% retracement and upward trend would have been the first bearish targets for the short trade. Point (C) would have been the ultimate target for the bearish trade. As you can see, that trade would have worked out nicely and taken about 5 days if initiated at point (A) on January 30th.

NASDAQ-100 Index Tracking stock (QQQ) - 60-minute interval

If prices can rally back above the 50-period moving average and consolidate around the gap around $46.50, a similar play could be setting up. A break below the 50-period moving average would signal our entry, and this would give us an initial downside target of $43.38, the 38.2% retracement, and an ultimate bearish goal of $41.50. The upper retracement anchor of $49.44 would serve as our stop. This is all contingent on the Nasdaq-100 being able to hold above support today, and rally back above the 50-period moving average.

Jeff Bailey
Senior Market Technician
Jeffrey Canavan
Assistant Analyst

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