Nvidia (NVDA) is finally showing signs of profit-taking, suggesting that the entire technology sector might be ready for a breather. This could present many bearish trading setups in various stocks because of the influence Nvidia has had leading the AI bubble. For now, let's focus on making a bearish trade in the Invesco QQQ Trust , an ETF that tracks the Nasdaq 100 index.
After hitting an all-time high, QQQ is getting rejected at $486. In the 6-month daily chart below, I have used Fibonacci retracements to project some downside price targets. These retracements provide valuable insights, projecting current price dynamics into the future, helping me anticipate potential market movements with more clarity.
Fibonacci analysis shows that QQQ could drop all the way down to $459 before it sees some relief. This level represents a 5.5% pullback and coincides with 61.
8% retracement level which is widely considered an area of support for stocks in an uptrend. The Trade The trade structure I have chosen here is called a Bear Call Spread also known as a Call Credit Spread. To construct my trade, I will want to sell a $483 call option and buy a $488 call option as a single unit.
As long as QQQ stays below $483 in the next 17 days, this trade will return a 38% ROI on the money risked. When selling credit spreads, you bring in a premium when you open the trade. If the trade goes in your direction, you get to keep that premium.
This trade brings in a $140 premium with a 66% chance of succe.
