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QQQ -- Time to Sell?

10/28/02 01:28:55 PM
by Koos van der Merwe

The QQQs are beginning to look 'toppy.' Is it time to sell?

Security:   QQQ
Position:   Sell

Here are two differing views on the QQQs based on whether your outlook is long- or short-term.

For those traders with a short-term outlook, I've used my Red/Green trading strategy. To recap, The green line is a 1-day moving average of the HIGH offset forwards by 10 days, and the red line is a 1-day moving average of the LOW offset forwards by six days. The BUY/SELL trigger is the light grayish line and is a 5-day moving average offset forward by one day.

Figure 1 below is of the QQQ, showing that they are about to give a close buy (long) signal. This is confirmed by the stochastic oscillator which is overbought and beginning to turn down, probably about to give a sell signal.

Figure 1: QQQs analysis using Red/Green strategy.
Graphic provided by: AdvancedGET.
For my second analysis I'm using the JM stragegy. This is for long-term investors. To recap, the JM strategy is based on an internal band of a 15-day moving average offset vertically by 2 percent and -2 percent. The closeout trigger is an optimized moving average to give the best parameters to use as a SELL (closeout long or short) for the QQQs. In Figure 2 the parameters for the optimized moving average are a 13-day moving average (thin red line).

Figure 2: The JM strategy for investors.

The chart suggests that there is still a long way to go before a close buy signal will be given even though the oscillator is overbought and possibly giving a sell signal in the near future.

As an investor, I would therefore hold the QQQs until it broke below the optimized moving average, when I would close out my BUY position. I would only go short when the QQQs break below the bottom channel line.

So here you have two strategies, both successful but different in that you must decide what type of trading category you fit in. Are you a trader or an investor?

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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Date: 10/29/02Rank: 5Comment: 
Date: 10/29/02Rank: 5Comment: Thanks for this and related arti- cles by Mr. Singer a month ago.

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