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Strategies & Market Trends : Playing the QQQQ with Terry and friends. -- Ignore unavailable to you. Want to Upgrade?

To: Gush who wrote (122)	5/17/2005 7:06:41 PM
From: Walkingshadow	Read Replies (2) \| Respond to of 4814

I agree, QQQQ is overbought by any measure: 139.142.147.218 Stochastics over 80, Williams pegged out, upper BB rail pierced and pushed open. But don't forget, overbought and oversold status are relative measures, not absolute. Relative extremes can become even more extreme. A classic example of this is volatilities, which have been reaching "extreme" low values for about a year now: stockcharts.com[w,a]daclyyay[df][p][vc60]&pref=G So, overbought and oversold to me are good general indicators of when a good time to buy or sell might be. But these barometers work best in the middle of a trend, not at the pivot points. If a trend is changing from an uptrend to a downtrend, oversold will become ever more oversold; conversely, when a trend is shifting from a downtrend to an uptrend, the bias will be towards tolerating much more extreme overbought states than would normally be the case in the middle of a trend. If you think about this, I think you'll see that if this were not true, then there could never be a trend change! You can also see this working out with BBs... sometimes a stock or index will hit one of the BB rails, and won't bounce back, but instead will just push against the rail, sometimes for an extended period of time. That is a reflection of the fact that the trend is now much stronger than previously (the BB can be thought of as the "borders" of momentum during the middle of a trend). Look at this chart... RSTG was technically oversold as defined by the BBs in the latter part of March, and then proceeded to just get more and more oversold, nearly doubling the value of RSTG in just 12 trading sessions! 139.142.147.218 But notice also the steady rise in relative strength. That is what allowed this to happen: the stock was shifting from a relatively weakly trending stock with relatively low relative strength, to a strongly trending stock with a lot of relative strength. Now... all that being said.... your point is very well taken, and QQQQ is getting ahead of itself! It is due for a pullback, and there was volume activity today that strongly suggests that this pullback will begin tomorrow and could last a few sessions (depending on how sharp the pullback is). So if I was daytrading QQQQ, I would be looking for a short entry, and probably I would have shorted the index into the close and held overnight and into tomorrow's session. T