QQQ ETF: Price Action, Support and Resistance ZonesNOTE: Traders get trends and pivots wrong all the time. It's more important to know when you're wrong than it is to focus on being right all the time. Nobody is right all the time. It's about how you manage the trade when you're wrong.
As a trader with an eye for market movements, I have been monitoring the NASDAQ, particularly the QQQ ETF, to better understand its price action and significant support and resistance zones. In this idea, I will share my observations and insights while educating readers about the concept of price action moving from zone to zone upon breaching a particular level.
Before diving into the analysis, let's first discuss the educational aspect of price action. Price action refers to the movement of an asset's price over time and is often used by traders to make informed decisions based on historical price data. By analyzing price action, traders can identify patterns, trends, and potential areas of support and resistance that can influence future price movements.
Going back to January 2021, QQQ has displayed substantial support and resistance zones in the area we are in right now, between $316.50 and $323. The price swings leaving this zone began small and increased in volatility, especially leading up to the November 2021 top.
There's another zone between $348 and $353 , which could be an upside target if tech performs strongly and propels QQQ out of the current zone. Historically speaking, a backtest of this zone has resulted in a rejection in most cases (though not all - see the initial NOTE at the beginning of the idea).
Downside zones include the $260-$268 range, which would entail a retest of the October/November 2022 lows. If that level is breached, we could witness prices between $229 and $237. These zones are approximate, based on prior price action. It's crucial not to underestimate the possibility of revisiting these price levels, as markup frequently occurs, making traders complacent with the new norm even when companies are deemed significantly overvalued.
A prime example of an overvalued stock is NVIDIA (NVDA). Ideally, NVDA should be valued below $100, but investor sentiment remains exceedingly bullish for various reasons. The lesson here is that it's essential to stay vigilant and consider historical price action when evaluating potential support and resistance zones.
Understanding price action and its movement from zone to zone upon breaching specific levels is vital in making informed decisions in the market. By keeping an eye on support and resistance zones, traders can better gauge market trends and potential areas of interest for the QQQ ETF and other assets, leading to more successful trading outcomes.
