Proshares Ultra Short QQQQ (QID): Playing the NASDAQ Pullback
Written by Bill Rusnak. Yesterday, the Nasdaq Composite Index took a noticeable 2.98% loss, which amounted to 74.49 points. Many folks would agree that a pullback was bound to happen and this was really no surprise to anyone. The uncertainty lies within the depth of this correction. Are investors finally ready to take some profits?
On the technical side, one can see that the most recent upward trend line has been breached on Wednesday, the 28th of April. During the next couple of sessions, the market displayed what Richard D. Wyckoff coined as the hinge pattern, which is labeled in red below. With the bear move yesterday, that pattern was officially broken, which can be a sell signal to many technical traders.
If you didn’t catch the move today, you might not be too late. There still seems to be more room for price to move downward until buyers regain control of the momentum. A likely spot for this event to occur could be around NASDAQ 2325. So how does one play this?
If you aren’t into trading index futures, another way to short the NASDAQ is to play the inverse exchange-traded funds (ETF), specifically QID, the Proshares Ultra Short QQQQ. When the NASDAQ falls in price, QID will significantly rise, as it did today with a gain of 6.13%. Keep in mind, though, that this move is a pullback in a larger bull market, so in the case of an unexpected rally, a reasonable stop loss is necessary for a short.
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Disclosure: Long QID
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