But Do Not Short Too Soon!
PowerShares QQQ Trust Series 1 (NASDAQ:QQQ) is Nearing its Orange Price Channel & Blue Rising Wedge Tops.
QQQ is approaching its orange roll-up price channel top and blue rising wedge top. I drew a classic megaphone top on the chart to show a typical way this move would end (green scenario).
But you never want to short a price channel melt-up set-up until a top completes because these price channel set-ups can complete with huge vertical blow-off top moves (pink scenario).
Price Channel Melt-Up Setups Often Complete with Big Vertical Move
Although QQQ has maxed out the number of waves in its price channel melt-up set-up, it has to complete with a top and there’s no confirmation that it has even started a top. And the top it eventually starts to form could be an extremely thin, fast-moving, vertical rising wedge that carries the price all the way to 140.
The blue rising wedge would usually break out downwards, but they do sometimes break out upwards into huge, fast moves.
How To Play It
I’m watching for QQQ’s price action at the top of the orange price channel. A pierce of that followed by a partial pullback then another breakout would mean a rising wedge top, even a blow-off top.
If QQQ returns to the orange channel bottom after reaching or piercing its top, it means it’s forming a more conventional megaphone or H&S top.