How to protect yourself against sell-offs with the QQQ Nasdaq 100 ETF


Tech stocks are under pressure again this week.

The high-tech Nasdaq 100 has been looking for a loss since Monday, while the S&P 500 overall is mostly flat. That index is down 1% for the month, as the S&P has risen more than 2%.

Long-term tech bull Todd Gordon, founder of TradingAnalysis.com, said he is cutting some of his exposure to the sector as interest rates rise and make high-growth stocks less attractive to investors. He said a key level in the charts should indicate whether the names of the technologies are further broken down.

Using the QQQ Nasdaq 100 ETF as a proxy for tech stocks, you see two significant levels highlighted by trend lines: the first at $ 303 and the other going back to the second-half 2020 lows around $ 294. The QQQ ETF, which has Apple and Microsoft among its main components, traded above $ 311 on Thursday.

The shorter 120-minute time frame chart breaks down those technical levels even further. Gordon said that the three-wave retracement structure, where an asset goes down, goes up, and then goes down again, suggests that we are in the latter phase with the potential for more downside at about $ 307.

“All that means is if we don’t have $ 307 in the QQQs here, I think we’re going to go down and test those more significant uptrend lines from here in November 2020 and also this longer term channel from September 2020. If we break them, that’s much bigger, they’ll be a much bigger problem, “Gordon said.

To protect your portfolio against any inconvenience, you are buying the 300 strike put due May 21 and selling the 290 strike put. That $ 10 sell margin risks $ 300 to earn $ 700.

“If we start holding $ 307, I’m going to remove this hedge, take a small loss, which is fine because then I will have held most of my tech stocks, which should continue to rise. But, if we don’t hold $ 307, I think that we will go out and test that daily channel from mid-2020, “Gordon said.

Disclaimer

.

Source link