The Nasdaq climbed 28 points, or 0.6%, to finish at 4,891 last Friday. Tech was strong throughout the session following a dip to 4,859. Near-term support at 4,850 and the 50-day moving average held strong, and there is backup support at 4,800 – 4,775 and the 100-day moving average.
My research is showing that a close above 4,900 – 4,925 could lead to another run at 4,975 – 5,000-plus.
The Nasdaq’s 100-day moving average is currently at 4,776, with “stretch” to 4,750. I was watching last week to see if these levels would come into play, as I thought it could create a great buying opportunity.
Last Thursday’s low on the Nasdaq reached 4,825. In other words, there was another 1% pullback built into my lows, but a close above 4,900 may signal that a temporary bottom is in.
The best way to play this action, if there is a rebound this week and into April, is with the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ).
I wanted to see the QQQs test $104 – $103.50 last week, and Thursday’s low touched $104.24. This was pretty close to a cigar for the bears and may have also signaled that some selling pressure could be subsiding.
The bulls need to get continued closes above $106 on the QQQ to re-establish a run at $108 and possibly $110, and I have two options recommendations to play the potential move.
To play a rebound, “dead cat bounce” or the start of a new trend, I have targeted the QQQ April 108 calls and the QQQ May 110 calls.
I recommend using limit orders up to 65 cents to purchase the QQQ April 108 calls and limit orders up to 80 cents to purchase the QQQ May 110 calls.
The April calls are the regular monthly options that expire on April 17, and the May calls are the regular monthly options that expire on May 15.
I have set my initial target at $1.30 for both trades, which is where I would like to close the first half of each option. If my targets are reached, they would represent gains of 100% from my recommended entry prices.
Bearish traders could also target the QQQ May 100 puts if the QQQs trade to or close below $103.50 – $103.
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