One of my favorite QQQ indicators just gave me an example of clear sign on how to trade it and I wanted to send it right out to you. Read below for the chart that showed the signal in this example, why options offer great advantages for trading it, and an update on a previous trade.

QQQ, or the Invesco QQQ Trust, is an exchange-traded fund that trades on the Nasdaq under the symbol QQQ. When I look for QQQ trades I want to know what the recent activity on the NASDAQ has been. Here is what I look at:

This chart image is courtesy of FINVIZ.com a free website and gives a quick view of each day’s movement. 

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Next, I go to my Fibonnacci Exponential Moving Average (EMA) indicator on the QQQ chart. It is shown as three colored lines that help provide a visual of the direction QQQ is moving and the strength of that trend. It can also help me find a price target that I will use to build my trade. To get the nuts-and-bolts explanation of the EMA, click here.

How To Build This Potential Trade

In the highlighted area above, we see that QQQ is moving down. If the price fell to $436 you could consider a put trade. $426 is the short-term target.

Options allow us to keep the risk down and the potential profit up. To buy stock shares of QQQ today would cost approximately $436.05 per share. You would wait until price found a bottom before buying stock.

Let’s discuss a Put option trade for our example.  If you bought one Put option that covered 100 shares of QQQ for the 435 strike, it would cost about $17.65 for the Sept 20th expiration date. This would be an investment of $1765. If the price fell the expected $10 you could expect to make approximately $5.00. This would be a $500 profit on your $1765 investment, or 28% profit.

Option trading is truly unique in its ability to give traders the opportunity to trade an equity’s price move in either direction.

I have provided many trading examples and additional explanations of my favorite indicators on my site. Be sure to check it out here.

I wish you the very best,

Wendy

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Past potential trade update:

Last week we discussed buying calls. On 7-30 the Aug 16th 465 calls were $9.43. You could have sold on 8-1 for $14.36, a 52% profit.