QQQ: The Stage Is Set for a Summer-End Rally

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Wednesday’s intraday bullish reversal for stocks was one of historic proportions and left behind on the charts several so-called hammer candles — a sign that promises further gains for stocks over the near-term.

Beat the BellThe PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) too saw a significant bullish reversal as its key holding Apple Inc. (NASDAQ:AAPL) quickly got back on its feet after a brief intraday melt-down. Active investors and traders could look to buy the Nasdaq-100 for a further rally.

Unlike the S&P 500, the Dow Jones Industrial Average or even the Russell 2000, the Nasdaq-100 in recent trading days never tested the lower end of its year-to-date range, but rather held in the upper half as momentum darling stocks remained at elevated levels.

The bigger picture of investors chasing fewer and fewer stocks higher remains intact and considering the clustering of some of those stocks in the Nasdaq-100, the QQQ ETF could be a good candidate to rally.

QQQ ETF Charts

Starting off with the multi-year picture of the Nasdaq-100, we see that the trend remains decidedly higher, with the majority of price action since last November having taken place in the upper half of the range and above the middle line (red) of the Bollinger Bands. This middle line again held as support Wednesday, so you know.

Trend followers will respect this trend until it ends, which is to say they will take notice if the middle line breaks and certainly if the lower Bollinger Band gets taken out.

For now, and until such time, the trend remains our friend despite weakening breadth in the overall market.

QQQ weekly chart
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Looking at AAPL stock on the weekly chart (the largest single-stock weighting in the Nasdaq-100), we see that over the past two weeks, the stock broke below its lower Bollinger Band. On Wednesday, Apple briefly dipped into an area of support between $106-$115 and promptly got rejected higher. While the stock is not necessarily out of the woods just yet, yesterday’s bounce off this support area is the second in a week and could support a further rally in the Nasdaq-100.

AAPL weekly chart
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On the daily chart of the Nasdaq-100, we see that the index intraday pierced below its blue 100-day simple moving average, and by so doing also filled the up-gap from July 13.

QQQ daily chart
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Through this lens, the price action since the July top could be looked at as a bull flag pattern (black lines) that considering the seasonal strength in the middle to late part of August and too-bearish consumer sentiment could see a resolution to the upside toward $115, where traders could use Wednesday’s intraday lows as a last stop-loss area.

Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/nasdaq-100-qqq-summer-rally-aapl/.

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