Upside Down on QID- Where to From Here?

Last week I was looking pretty smart as the market gave quite a bit of ground after two months of unabated appreciation.

This is a different week, and the market has resumed its climb, which so far is ok with me.

I one point I was up nicely on my 2,000 shares of QID- nearly $4k- now, with the market charging back up and on to higher levels, I am currently in a loss position of around $2800- however, as the market moves up, I’m making it back with PNWIF and CREE behaving a bit better.

So, since I chose not to take the profit when the opportunity was offered, where to from here? I was considering going in a bit heavier, but have held off for the time being. I’ve had another look at the charts, and believe there is an interesting dynamic going on that suggests there could be a little more upside in the NASDAQ COMP, which is what I’m betting on.

I’m still sold on the idea there is going to be one more big whoosh to the downside in the markets before we can really get healthy. My entry point on this last trade was good for a few days, but there is an interesting dynamic going on that might drive the market a bit higher in the short term. Take a look at this chart:

This chart is an overlay of the NASDAQ COMP vs the QQQQ- which represents the NASDAQ 100. As you can see, the QQQQs completed a 61.8% retracement of the 1st quarter carnage, but the NASDAQ COMP never really got there.

I believe there is a possibility the NASDAQ COMP might still be gunning for that 2600 level, which would complete the 61.8% retracement of the sell off there as well.

The S&P 500 looks almost identical.
If the NASDAQ COMP does trade up to 2,600, that is when I will get really aggressive on QID, which might include adding to my position in the stock, and/or jumping into some more aggressive call options.

For the time being, I am just standing pat and waiting with the position still open. I should have sold when I was up, but you can’t call them perfectly all the time.

With the headwinds of higher oil and interest rates, I just don’t think the market is quite ready to get super healthy. The pros are probably painting the tape at month’s end to make the picture look at bit rosier than it deserves to be and blow out all the shorts.

Comments and questions are welcome.

2 thoughts on “Upside Down on QID- Where to From Here?

  1. if you buy dxd at the time you bought qid, now you still making money . as for oil price, i believe it is quite near the top, the existing high price is unreasonable and very speculative, only one reason would drop it quickly, instead it would give a boost to dow/nad . As summer approach, most peopel would think the market would be weaken. and would rebound when the fall is near especially the oil may rise further due to high consumption. But in my mind, it is a golden rule, when something rise to very high, unreasonbale high, it would fall back grdually , but i don’t know when would happen, may be very soon. Right now, the weakest sector is financial and i believe roation would happen very soon.

    Editor: Not sure how you do the math on a security I paid $38.75 for, and it’s now trading at $38.20. I still believe it is going to $44 to $45. Oil could well be topping. I have read that the best cure for high prices is high prices. Meaning- when prices go up, consumption slows, and prices come down. However, oil is a bit different, because of global demand. The big issue- how high does it need to go to slow global demand? As you rightly point out, all parabolic rises eventually end up falling apart. It’s just hard to say when. In 1997, Alan Greenspan called the stock market “irrationally exhuberant”- it chugged a lot higher for 3 more years before it completely fell apart.

  2. Just out of curiosity, why do you compare QQQQ against the .COMP, and not the .NDX?

    Editor: We should do that as well. I believe the Q’s are really a proxy on the NDX, not the COMP. Will have a look at that comparison as well.