Trade of the Day: Powershares QQQ Trust Series 1 (QQQ) ETF Is High Risk, High Return

The QQQ ETF could makes sense for either short- or long-term investors

By Sam Collins, InvestorPlace Chief Technical Analyst

Powershares QQQ Trust Series 1 (NASDAQ:QQQ) — This Morningstar-rated five-star exchange-traded fund seeks to obtain results that correspond to the price-and-yield performance of the stocks in the Nasdaq 100 index. Although the risk is rated “high,” the return is also rated “high.”

In fact the “Q’s” have an annualized five-year market return of 17.67%, and a three-year return of 13.39% as of Jan. 9. In 2016 they were up over 7%. An investor benefit is its relatively low expense ratio of 0.2%. The “Q’s” paid a dividend of $1.25 over the past year for a yield of 1.03%.

The top-ten holdings of the fund: Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT),, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), Alphabet Inc C (NASDAQ:GOOG), Alphabet Inc A (NASDAQ:GOOGL), Intel Corporation (NASDAQ:INTC), Comcast Corporation (NASDAQ:CMCSA), Cisco Systems, Inc. (NASDAQ:CSCO) and Amgen, Inc. (NASDAQ:AMGN).

Following a low in February 2016 at $95, the Q’s rallied to the 200-day moving average at about $110 where it consolidated for four months, then broke from resistance at $111. A new leg up culminated in another consolidation at $115 to $119.

While advancing from its February low, a bullish support line with lows at $105, $115, and $117 was established, providing a line of buying that limited profit-taking. On Friday the ETF broke through resistance at $121, again establishing its powerful uptrend.

Buy QQQ at $122 with a trading target of $150 and a proposed gain of over 20%. Although Morningstar rates this ETF as “High Risk,” there are several investment-grade stocks held by the fund including Intel (B-) and Cisco (B+), etc. Thus, investors may also consider QQQ for long-term participation in the computer and technology sectors.

QQQ Buy breakout 122 T150
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Trade of the Day: Powershares QQQ Trust Series 1 (QQQ) ETF Is High Risk, High Return

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