The Nasdaq 100 ETF (QQQ) reversed its uptrend sign from April seventeenth, 2020 as two trend-following indicators turned bearish this week. The chart under exhibits QQQ with the deepest decline from a excessive because the 10.9% decline in February-March 2021. Previous to that, the deepest decline was in September 2020 (-12.6%).
Despite the fact that these two declines have been deeper than the present decline (10.4%), they didn’t set off downtrend indicators and have been deemed pullbacks throughout the greater uptrend. This decline is totally different as a result of the Pattern Composite turned detrimental (-3) this week, which implies 4 of the 5 indicators triggered downtrend indicators. Additionally be aware that StochClose moved under 40.
The inexperienced and pink shadings present the prior pattern indicators for the indications. We are going to concentrate on the Pattern Composite indicators. On the final two accomplished bullish indicators, QQQ gained some 69% from April 2020 to January 2022 and 52% from July 2016 to October 2018. The 2 downtrend indicators have been blended. The bearish sign on October twenty fourth averted the meltdown in late 2018. The downtrend sign on March twelfth was close to the covid low (March twenty third), however it maybe preserved a bit sanity by having a method in place.
Understand that trend-following indicators by definition lag. They won’t catch the precise backside or high, however will catch an prolonged pattern ought to it develop. Pattern-following indicators also can restrict drawdowns. Word that QQQ skilled two drawdowns in extra of fifty% since 2000 (2003 and 2009), in addition to a 28% drawdown in March 2020. Having a method for entry and exit may help seize the upside and restrict the draw back.
The Pattern Composite and ten different indicators can be found on the TIP Indicator Edge Plugin for StockChartsACP (here). The Pattern Composite aggregates pattern indicators in 5 trend-following indicators: Bollinger Bands, Keltner Channels, Transferring Common Course, StochClose and CCI Shut. The Pattern Composite turns bullish when at the very least three of 5 sign uptrends (+1) and bearish when at the very least three of 5 sign downtrends (-1). Totally different indicators work at totally different occasions and the Pattern Composite is designed to seize the mixed indicators.
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Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic strategy of figuring out pattern, discovering indicators throughout the pattern, and setting key value ranges has made him an esteemed market technician. Arthur has written articles for quite a few monetary publications together with Barrons and Shares & Commodities Journal. Along with his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Enterprise College at Metropolis College in London.