Most investors are only too aware of the brutal selling in tech stocks this year…

Soon after the bell rang to bring in the New Year, the Nasdaq began its massive move down.

By the time the Invesco QQQ Trust Series 1 (QQQ) hit its 2022 low on October 13, it had lost 36% of its value since the start of the year.

And it saw trillions of dollars wiped out.

Yet within QQQ’s massive downtrend, there have been major counter-rallies…

And there’s been a series of smaller ones too, like the recent rally off the October lows.

So today, we’ll see if the recent up move will peter out like all the previous ones. Or can QQQ finally get some clear air?

Two Key Technical Signals

The chart of QQQ below shows that it has been in a downtrend all year…

After peaking in November last year, QQQ made a series of lower highs at ‘A,’ ‘B,’ and ‘C.’ Plus, the longer-term 50-day moving average (MA – blue line) has clearly been trending down.

Check out QQQ’s chart…

Invesco QQQ Trust Series 1 (QQQ)

Source: eSignal

Two technical signals coincided with each of those down moves…

1. After hitting each major peak at A, B, and C, the 10-day MA (red line) clearly broke below the 50-day MA, confirming QQQ’s next down leg.

2. The RSI bearishly remained in the lower half of its range (below the green line).

Then, each of those countermove rallies (against the major downtrend) got going when the Relative Strength Index (RSI) formed a ‘V’ out of oversold territory (lower grey dashed line) and rallied.

You’ll also notice another pattern with the RSI…

The rally up to the peaks at A, B, and C coincided with the RSI bullishly breaking into the upper half of its range.

However, when the RSI’s rally petered out at resistance (green line), those countermoves also ran out of steam.

You can see three examples of these smaller counter-rallies that failed at ‘a,’ ‘b,’ and ‘c’ on the chart.

Take another look…

Invesco QQQ Trust Series 1 (QQQ)

Source: eSignal

And it’s this action around the RSI’s resistance that I’m watching closely right now.

So what am I looking for around here?

The RSI Must Hold Support

After briefly piercing resistance in late October, the RSI failed to gain traction in the upper half of its range. That’s why the counter-rally fizzled out at ‘c.’

But as you can see, after a brief pullback, the RSI again broke above resistance in November…

That happened at the same time the 10-day MA bullishly broke back above the 50-day MA. That’s the first time this had happened since QQQ’s counter-rally up to ‘C.’

However, since then, the 10-day MA has failed to accelerate higher. Instead, it’s tracking closely with the 50-day MA and is in danger of breaking back down.

That’s why the RSI support level will be key…

Right now, the RSI is tracking right on top of support. For QQQ’s emerging up move to regain momentum, the RSI must remain in the upper half of its range.

If instead the RSI falls through support and the 10-day MA crosses back below the 50-day MA, then this current up move will also fizzle out. That’ll create another lower high.

If that happens, then QQQ will likely open another leg down.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict

P.S. Last Wednesday, I shared important information about structured notes… and why they’re such a powerful income opportunity in the current market.

Structured notes allow us to make plays like, “If the S&P 500 doesn’t fall more than 30% before the maturity date, then we’ll get paid a 14% coupon on our money.”

Frankly, that’s a great risk-reward scenario. And considering our bank accounts are paying us less than 1% in most cases, it’s one of the few places where we can actually beat inflation and make a solid return on our capital… without the risk of directly buying stocks.

To learn more details, please catch the replay of my event before it goes offline. You can find it right here.

Reader Mailbag

In today’s mailbag, a few One Ticker Trader members share their thoughts…

Good morning, Mr. Benedict.

Once again, thanks for the opportunity to use your One Ticker Trader system.

This time I traded 20 contracts and booked a very nice profit.

I’m thoroughly convinced your One TickerTrader system is the best system to use in these challenging market times to make money. I’m well on my way back to making up the losses I incurred when the market crashed this year.

I can’t wait for your next trade recommendation!

– Frank B.

Larry, I just wanted you to know that I made my first profit using your One Ticker Trader system. I’m looking forward to your next recommendation. Keep up the good work!

– Bob M.

I’ve been following one of Larry’s recommendations and it paid off the subscription.

– Fredrik H.

Thank you, as always, for your thoughtful comments. We look forward to reading them every day at feedback@opportunistictrader.com.