{"id":3909,"date":"2014-04-28T12:58:21","date_gmt":"2014-04-28T16:58:21","guid":{"rendered":"http:\/\/www.morpheustrading.com\/blog\/?p=3909"},"modified":"2014-05-29T11:23:05","modified_gmt":"2014-05-29T15:23:05","slug":"3-reasons-sell-short-qqq-nasdaq-etf","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/3-reasons-sell-short-qqq-nasdaq-etf\/","title":{"rendered":"3 Reasons Why Now Is The Time To Sell Short $QQQ (Nasdaq 100 ETF)"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-full wp-image-3913\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2014\/04\/QQQ.jpg\" alt=\"Selling Short QQQ\" width=\"174\" height=\"103\" title=\"\">Although my\u00a0rule-based market timing system has mostly been in &#8220;sell&#8221; mode for the past month, I\u00a0have only recently begun looking for stocks and ETFs to sell short because I\u00a0have been\u00a0<a title=\"Why Patience Is Crucial For Short Selling Stocks\" href=\"https:\/\/www.morpheustrading.com\/blog\/patience-short-selling-stocks\/\" target=\"_blank\">patiently waiting for former leading stocks\u00a0to start bouncing<\/a> into their (new) resistance levels.<\/p>\n<p>Thanks to the bounce off the April 15 lows, followed by last week&#8217;s stalling action, both the NASDAQ Composite and NASDAQ 100 indices (the &#8220;NASDAQ brothers&#8221;) are now poised\u00a0for lower prices in the coming weeks.<\/p>\n<p>As such, I am now stalking PowerShares QQQ Trust ($QQQ), a popular ETF proxy for the NASDAQ 100 Index, for potential swing trade short entry in my <a title=\"The Wagner Daily\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\"><em>Wagner Daily<\/em> newsletter<\/a>.<\/p>\n<p>Following\u00a0are 3 objective, &#8220;no nonsense&#8221; reasons why&#8230;<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/3-reasons-sell-short-qqq-nasdaq-etf\/#1_Bearish_NASDAQ_Trend_Reversal_Now_Under_Way\" >1.) Bearish NASDAQ Trend Reversal Now Under Way<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/3-reasons-sell-short-qqq-nasdaq-etf\/#2_Bearish_%E2%80%9CHead_and_Shoulders%E2%80%9D_Pattern\" >2.) Bearish &#8220;Head and Shoulders&#8221; Pattern<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/3-reasons-sell-short-qqq-nasdaq-etf\/#3_key_nuances_of_the_best_head_and_shoulders_patterns\" >3 key nuances of\u00a0the best head and shoulders patterns<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/3-reasons-sell-short-qqq-nasdaq-etf\/#3_Fibonacci_And_The_Shooting_Stars\" >3.) Fibonacci And The\u00a0Shooting Stars<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/morpheustrading.com\/blog\/3-reasons-sell-short-qqq-nasdaq-etf\/#QQQ_%E2%80%93_Why_Now_Is_The_Right_Time_To_Sell_Short\" >$QQQ &#8211;\u00a0Why Now Is The Right Time To Sell Short<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"1_Bearish_NASDAQ_Trend_Reversal_Now_Under_Way\"><\/span>1.) Bearish NASDAQ Trend Reversal Now Under Way<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The NASDAQ\u00a0Composite (a broader-based index to follow than the NASDAQ 100) has already broken its uptrend line that began with the lows of\u00a0late 2012, and is no longer setting &#8220;higher highs&#8221; and &#8220;higher lows&#8221; on its weekly chart.<\/p>\n<p>The\u00a0longer-term uptrend line (from the lows of 2011) is still well below the current price of the NASDAQ, but would likely become a target support level to the downside if market conditions continue to deteriorate:<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/\/~rick\/\/charts\/2014\/140428NAZ.png\" alt=\"$Nasdaq how to confirm bearish reversal \" title=\"\"><\/p>\n<p>Considering the NASDAQ has recently broken a 17-month uptrend line <em>and<\/em>\u00a0its 10-week moving average (blue line above) is rolling over, negative price momentum is certainly building.<\/p>\n<p>If the NASDAQ cracks below the red horizontal line shown on the chart above, the index will set another &#8220;lower low&#8221; on the weekly chart.<\/p>\n<p>Also, last week&#8217;s high could turn out to be a &#8220;lower high&#8221; on the weekly chart.<\/p>\n<p>If the NASDAQ\u00a0breaks below its\u00a0April 15 low <em>before<\/em> getting above last week&#8217;s high, the index will have formed a &#8220;lower high,&#8221; followed by a &#8220;lower low&#8221; on the weekly chart, which would confirm a bearish trend reversal.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"2_Bearish_%E2%80%9CHead_and_Shoulders%E2%80%9D_Pattern\"><\/span>2.) Bearish &#8220;Head and Shoulders&#8221; Pattern<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>When a stock or index is forming a significant top, a bearish chart pattern known as the &#8220;head and shoulders&#8221; commonly forms (<a title=\"Head and shoulders chart pattern defined\" href=\"https:\/\/www.morpheustrading.com\/blog\/trading-the-head-and-shoulders-chart-pattern\/\" target=\"_blank\">here<\/a> is a primer on how the pattern works).<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-3910\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2014\/04\/140428QQQHS.png\" alt=\"$QQQ head and shoulders pattern\" width=\"970\" height=\"786\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2014\/04\/140428QQQHS-110x89.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2014\/04\/140428QQQHS-300x243.png 300w\" sizes=\"auto, (max-width: 970px) 100vw, 970px\" \/><\/p>\n<p>Like every chart pattern, there is never a guarantee that a head and shoulders pattern will follow through to much lower prices.<\/p>\n<p>However, over the years, I have found the head and shoulders to be one of the more reliable chart patterns (but <em>only<\/em> in a weak or downtrending market). Furthermore, there are&#8230;<br \/>\n<a name=\"hs\"><\/a><\/p>\n<h3><span class=\"ez-toc-section\" id=\"3_key_nuances_of_the_best_head_and_shoulders_patterns\"><\/span>3 key nuances of\u00a0the best head and shoulders patterns<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>Volume on the right side of the pattern should be heavier than on the left side. This shows heavier selling action (institutional distribution) on the way down versus on the way up to form the &#8220;head.&#8221;<\/li>\n<li>Time symmetry is important, meaning the length of time it takes to move from the top of the left shoulder up to the head should be similar or equal to how long it takes to go from the head and down to the top of right shoulder. In this case, I count six weeks on both sides of the head (perfect time symmetry).<\/li>\n<li>Neckline formed on right side of pattern should be equal to (or slightly lower than) the neckline on the left side of the pattern. This indicates increasing weakness on the test of support.<\/li>\n<\/ol>\n<p>Since $QQQ is affirmative on all three of the detailed nuances above, I would say<strong> this head and shoulders pattern has pretty good odds of following through<\/strong> to the downside.<\/p>\n<p>If it does, the projected decline below the neckline should be roughly equal to the move from the neckline to the top of the head.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"3_Fibonacci_And_The_Shooting_Stars\"><\/span>3.) Fibonacci And The\u00a0Shooting Stars<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If you&#8217;re new to technical analysis, the title of this sub-heading may sound like an Italian rock band, but both terms are actually technical indicators I more frequently use in bearish or downtrending markets.<\/p>\n<p>On April 15, the\u00a0NASDAQ brothers dipped below pivotal support of their February 5 &#8220;swing lows&#8221; on an intraday basis, then recovered to close near their highs of the day.<\/p>\n<p>That day&#8217;s &#8220;shakeout&#8221; was followed by a substantial, week-long bounce off the lows, but the\u00a0buying interest was short-lived and faded just a few days later.<\/p>\n<p>When the price of $QQQ\u00a0stalled at its declining 10-week moving average, it was roughly equal to a 61.8% <a title=\"Fibonacci explained\" href=\"https:\/\/www.morpheustrading.com\/blog\/fibonacci-for-swing-trading\/\" target=\"_blank\">Fibonacci retracement<\/a>\u00a0(measured from the March 7\u00a0high down to the April 15 low).<\/p>\n<p>Then, the\u00a0NASDAQ brothers formed bearish <a title=\"Example of Shooting Star chart pattern\" href=\"https:\/\/www.investopedia.com\/terms\/s\/shootingstar.asp\" target=\"_blank\" rel=\"noopener\">&#8220;shooting star&#8221; candlestick patterns<\/a>\u00a0on their\u00a0weekly charts by reversing to close nearly unchanged and at their lows of the week.<\/p>\n<p>Last week&#8217;s shooting star in $QQQ (and resistance of the 10-week moving average) is circled\u00a0on the weekly chart below:<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/\/~rick\/\/charts\/2014\/140428QQQ.png\" alt=\"$QQQ BEARISH REVERSAL \" title=\"\"><\/p>\n<p>Confirming the 3 reasons I am ready to sell short $QQQ is the continued distribution in former NASDAQ leadership stocks.<\/p>\n<p>Some former NASDAQ leaders that banks, mutual funds, hedge funds, and other institutions have been ditching in recent weeks include: $UA, $AMZN, $NFLX, $CERN, $GOOG, $WYNN, $BIIB, and $PCLN.<\/p>\n<p>As long as\u00a0leaders like these are being sold with heavy volume, it will be\u00a0very difficult for the NASDAQ to get its footing.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"QQQ_%E2%80%93_Why_Now_Is_The_Right_Time_To_Sell_Short\"><\/span>$QQQ &#8211;\u00a0Why Now Is The Right Time To Sell Short<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As explained in <a title=\"How To Find The Best Entry Points For Short Selling Stocks\" href=\"https:\/\/www.morpheustrading.com\/blog\/best-entry-short-selling-stocks\/\" target=\"_blank\">this blog post<\/a>, I am not a big fan of selling short stocks as they are breaking down below support the first time around.<\/p>\n<p>Rather, the low-risk way to sell short stocks and ETFs is to wait for a\u00a0significant bounce off the lows, followed by a convincing, bearish reversal pattern or gap down.<\/p>\n<p>Since\u00a0$QQQ neatly fits this criteria, I have placed the ETF on my short selling watchlist (along with a few other stocks such as <a title=\"2 Former Leading Stocks To Sell Short Into The Bounce (And 1 Short ETF)\" href=\"https:\/\/www.morpheustrading.com\/blog\/best-stocks-to-sell-short-bounce\/\" target=\"_blank\">these<\/a>).<\/p>\n<p>Rather than selling short\u00a0$QQQ, traders with non-marginable trading accounts (such as IRAs) may alternatively consider buying the inversely correlated UltraShort QQQ ($QID).<\/p>\n<p>Best designed for short-term trading, rather than &#8220;buy and hold&#8221; investing, short ETFs such as $QID are a great way for traders with non-marginable accounts to still participate on the short side.<\/p>\n<p>Subscribing members of my <strong><a title=\"Subscribe to The Wagner Daily\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\">nightly swing trading newsletter<\/a><\/strong> should note my exact entry, stop, and target prices for this trade setup in the &#8220;Watchlist&#8221; section of today&#8217;s report.<\/p>\n<p><em>What do you think? Drop us any comments or questions below.<\/em><\/p>\n<div class=\"cfmonitor\"><center><script src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\" async=\"\"><\/script><!-- Footer of content --> <ins class=\"adsbygoogle\" style=\"display: inline-block; width: 300px; height: 250px;\" data-ad-client=\"ca-pub-7565144363001883\" data-ad-slot=\"7002222565\"><\/ins><script>\/\/ <![CDATA[\n(adsbygoogle = window.adsbygoogle || []).push({});\n\/\/ ]]><\/script><\/center><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Thanks to the bounce off the April 15 lows, followed by last week&#8217;s stalling action, now is the right time to sell short $QQQ. Here are 3 objective, &#8220;no nonsense&#8221; reasons why it is finally time to get back on the short side of the market (at least in the NASDAQ).<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[5],"tags":[],"class_list":["post-3909","post","type-post","status-publish","format-standard","hentry","category-stock-picks-analysis"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/3909","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=3909"}],"version-history":[{"count":0,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/3909\/revisions"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=3909"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=3909"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=3909"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}