QQQ | PowerShares QQQ Trading Journal with VantagePoint

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, Forex and ETFs. QQQ is in focus today….

This journal entry looks at the recent market movements of PowerShares QQQ NASDAQ: QQQ

VantagePoint Trading Journal QQQ

This week could turn out to be a dicey one. We have some political turmoil out of the White House with the indictment of Paul Manafort and Rick Gates. Also, the speed of the proposed tax cuts may be slower than the market had hoped for and the possibility that we may have a new Federal Reserve head by midweek only adds to the fray. The market does not like this uncertainty.

Using the artificial intelligence forecasting software VantagePoint, we can analyze individual stocks, futures or ETFs and broad indexes like the S&P, Dow, and the Russell. After utilizing our VantagePoint platform, I will entertain the possibility that we can go up or down from here. I’ll act on a strong signal in either direction. Remember, we are still in the teeth of earnings season. AMZN and AAPL have already posted some great news and I think the technology sector is set up to lead the way if the market continues its bullish momentum. Instead of trying to pick out the best of the bunch, I am going to focus on the NASDAQ index that trades under the ETF QQQ.  Here’s the chart:

image of QQQ trading diary with VantagePoint
Despite the string of non-market news, VantagePoint shows a new bullish crossover in QQQ on 10-27.

Using the predictive indicators of VantagePoint, we will note two crucial things. We have a bullish crossover indicated by the blue predictive moving average line crossing the black simple 10-day moving average on 10/27/17. We also see the VantagePoint proprietary neural index moving from a zero (0) to a one (1) position. This indicator measures strength and weakness for a 48-hour period. The move to the one (1) position indicates strength and further makes the case for a potential bullish scenario. That’s why I’m willing to entertain a bullish setup.

If one were a straight ETF trader, simply buying QQQ in the $152.50 area could prove prudent in anticipation of a predicted move to the upside. This would be a conservative way to enter QQQ without the limitation of time associated with other trading strategies. In this scenario, a sell-stop order in the $148.00 area would also be worth considering to mitigate potential losses.

For more active traders with a shorter investment time horizon, an options play could prove advantageous as well. Remember, ETFs such as QQQ are going to have less volatility than your typical individual stock because of a large number of equities that make up its value. So, we may have to temper our reward expectations. Due to the layered uncertainty in the market, I believe buying more time by going out to the regular December options would be a careful strategy to look into.

From three simple inputs, we can compute the magnitude of the projected move through expiration.  Those three inputs are the underlying price, at-the-money implied volatility and the date of expiration. Performing this calculation for QQQ yields a project move of approximately $6.50 or 4.3%. This targets the $158.00 price level. Let us consider then as a possible bullish set up using the QQQ December 155/158 call vertical paying $0.80. This will have a maximum risk of what one would pay for the spread, $0.80. The maximum reward will be the width of the spread less any premium paid or $2.20. This yields a reward to risk ratio of 2.75:1. Given the trading environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

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