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Shorting TQQQ

TQQQ (3x bullish Nasdaq 100 ETF) will be added as an Active Short Trade here (TQQQ roughly at 117.50 now) on the backtest of the primary bull market uptrend line. Suggested stops on a close over 117 (on QQQ), price targets TBD although this is intended as a multi-week to multi-month swing trade.

SQQQ (3x short $NDX) would only be a viable option for those looking for a short-term trade lasting just days to no more than a few weeks at most due to the price decay suffered from leveraged etfs when held for extended periods of time (hence, the reason for shorting TQQQ). Other options for shorting the $NDX (other than NQ emini futures & QQQ options) would be a raw short on QQQ or QLD (2x long $NDX) as well as a long in QID (2x short $NDX), which, in theory, should suffer less decay than SQQQ due to the lower amount of leverage. As always, make sure to adjust your position size to account for the use of leverage on any instrument that you are trading & always pass on trades that are not inline with your own objectives & risk tolerance.

Finally, this should be considered a somewhat aggressive, anticipatory trade as the $NDX has yet to even move below Friday's highs. A more conventional entry could be made (or an initial short here added to) on a break below any of the key support levels recently posted on the $NDX 120-minute chart.

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Oct 28, 2015 2:44pm|Categories: Completed Trades - Short, Equity Market Analysis|Tags: , |4 Comments

4 Comments

  1. glenjones October 28, 2015 3:22 pm at 3:22 pm

    I am more inclined to wait until late next week to put on market shorts as these two weeks are quite bullish historically. I can see the divergences forming and sentiment is excessively strong, but I don’t want to fight the usual bullishness at this time of year. I”ll be watching for a chance next week.

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    • rsotc October 28, 2015 3:54 pm at 3:54 pm

      Certainly the less-aggressive play & yes, seasonality favors the bulls at this point. However, it also seems that a lot of the biggest corrections have also come around this time, even though the bullish events outnumber the bearish events. I’m referring to how the market performed for the next 2-3 months. What I did was overlaid 52-week (1 year) cycle lines starting on Oct 30, 1995 (or as close as I could drag & release those lines so give or take a few days) on this 20-year weekly chart of the $NDX. http://schrts.co/jQFmyy

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      • Compression Point October 28, 2015 4:17 pm at 4:17 pm

        Randy, I jumped in with you, though I waited a bit and sold at $121. The NDX is overbought, it’s hugging the upper Bollinger band, and it’s had a recent big gap up. I’m not as worried about this as I usually am. I’m looking forward to seeing your suggested close levels.

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  2. rsotc October 28, 2015 11:07 pm at 11:07 pm

    Compression Point- I’m with you on that. Although I’d be a fool to say that a melt-up scenario is out of the question right now & even if it comes I am very comfortable with the R/R of shorting the Q’s here for what has the potential to morph into a multi-week/month swing short trade. With a max downside loss of about 11% (a beta-adjusted loss of roughly 3.75% when accounting for my reduced position size) and a minimum expected gain potential of about 40% (should the Q’s revisit the 98 area), this is very much a “sleep well at night” trade for me, plus, I only took a starter position that I plan to add to only on strength (i.e.- below my entry price or on “weakness” of the Q’s, to be more accurate). Best of luck on the trade.

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