February 2, 2012
Shares of the ETF Powershares Nasdaq 100 QQQ Trust (NYSE: QQQ) rose again on Wednesday, February 1. How much upside is left?
Though profit taking is part of any rally and we should expect to see it at any time, QQQ has shown a great deal of resilience of late, selling off early in the day but always seeming to work its way back to positive territory by the close.
One way to estimate how far an index can rise before running into a wall is to look at the past selloff and using Fibonacci resistance levels to pinpoint resistance levels.
QQQ lost some 16.2% in the August to July 2011 selloff. Now that it has erased all those losses, there are two important resistance levels ahead.
The first is the 127.2% retracement resistance level at QQQ 2547. That is only 2.2% above current levels.
If QQQ can close above this resistance it will be expected to reach the next retracement resistance level at 161.8% at QQQ 2685. This is 7.8% higher. This is critical resistance so expect substantial headwinds if it is reached.
The Fibtimer.com (http://www.fibtimer.com) Stock Timing Strategy holds a position in the Powershares Nasdaq 100 QQQ Trust.
Disclosure: I am long QQQ.