Looking at the timing of buying into QQQ, here is one of the tools I tend to like using. This comes from years of reading Dick Fabian's old Telephone Switch Newsletter. If you recall Dick's thesis was based on market following switching, rolling into and out of his investment of choice based on a couple of tracking indicators plotted against their 39 week moving averages.
In this case, with Q, to simplify things, I'm using Yahoo's charting showing the 50 and 200 day moving averages. The "buy-in" point would be immediately following the crossover or inverting of these two moving averages with the price curve. Currently the price curve has crossed up through the 50 day average curve and has crossed up through the 200 day as well. This gives a strong preliminary signal that confirmation of the change in trend is close. Currently the full signal has not yet been formally given, but one can anticipate it by examining the 50 day curve. The earliest 15 days of which are all in the area of $35 pricing. These put a drag on the upward movement of the 50 day curve. As these value points are shed over the next 15 days, and if (perhaps a big IF) the price holds at or around $40, then the 50 day curve will continue its move up towards the declining 200 day curve. Once that curve intersection occurs, the formal signal will be complete.
This is not to say reversals of fortune cannot happen or that short term twitching in either the price curve or these moving averages cannot happen, just that a new trend will likely be established and that the odds are likely that it will continue in a bullish phase for a long while once the three curves are in reverse position with the price curve at the top and the shorter moving average above the longer one. This method is not about picking tops or bottoms or squeezing the last possible profit dollar out of the price of the security.
Here is the chart in detail form to see the above specifics:
finance.yahoo.com
Here is the longer term view. Recall that this is being developed as a plan for up to a 40 year investment scheme. So we are not going to be concerned about every little twitch in the chart. Just trying to catch the slope from major inflection point to major inflection reversal point. The prior reversal point can be seen at just above $90 in this longer term chart and I am assuming we are getting quite close to the next:
finance.yahoo.com
When looking at this chart, its helpful to notice that there have been two recent periods of extreme low pricing in Q. Its in the back of my mind that if the January effect doesn't come through that yet one more extreme low point might develop over the next several weeks in this quarter or possibly the next. I am guessing that low point, should it happen would not be as low as the September extreme, therefore the $36 prior estimate. Once such a third dip were accomplished, this large longer term pattern would reveal a large inverted Head and Shoulders pattern. If such a pattern develops, it would be a long term bullish signal, so even a near term minor dip is not necessarily a significant negative in the longer term perspective.
During the next 15 business days, some or most of QQQ companies will be reporting earnings and/or losses. This being a reflection of business during the last three months the numbers should be particularly poor. How this plays out in terms of individual price moves and impact on the tracking stock in question remains to be seen. My guess is that Q will not suffer too dramatically regardless of the underlying business principally because the stock pricing will be more reflective of forward looking statements this time than emphasizing backward looking performance metrics such as earnings/losses. Basically, the way I look at it, if QQQ is at $40 or better after the next three weeks, its off to the races for a good six months to two years. |
