QQQQ | Necessary Pullback

The market made a nice and necessary pullback today. A lot of stocks on my watchlist, including the major indices, were becoming a little too overbought, overextended, and pulling too far away from their moving averages. Notice on this chart how overbought QQQQ was. Also, notice that it hasn't had much of a breather since its run up from 43.50.

Pullbacks are healthy and can provide nice entry points. They are also necessary to relieve overbought conditions to prepare the stock for its next move.

I like the base that QQQQ has formed over the last couple of months and feel that after this pullback (which likely has a bit more to go) it will be ready to make a run at 50ish before hitting some significant resistance.

QQQQ, in the very short-term (i.e. 10 min chart) doesn't look very healthy with a series of lower lows but if it gets back down to 47 I would expect another wave of buyers to step in. If you want to be part of that wave, should it even get down to 47, use tight stops.

Bottom line: I wouldn't be concerned with this pullback but I do recommend always having your targets and stops defined. If you're long, consider using 47ish as a stop and 50 as a target. If you're not in but you want to be, consider going long at 47ish, with a tight stop, and use 50 as a target.