The ProShares UltraPro QQQ (TQQQ) ETF has performed well over the years, beating the Nasdaq 100 index by far. Data shows that the fund’s total return in the past five years stood at 327% compared to the Nasdaq 100’s 157%.
The same trend has happened this year as the fund gained 53.90%, higher than Nasdaq 100’s 27%.
Technicals point to a TQQQ ETF surge
There are rising chances that the ProShares UltraPro QQQ ETF is about to go parabolic in the next few years if it rises above the key resistance level at $83.68. Moving above that level will be important because it will invalidate the double-top pattern that has been forming.
A double-top is one of the riskiest patterns in the market. In this case, it brings the possibility that the ETF will drop by 36% to get to its neckline at $48.93, its lowest level on August 5 of this year.
On the positive side, the ETF has been forming a multi-year cup and handle pattern, which is characterized by a rounded bottom and a consolidation or pullback at the top.
The TQQQ ETF peaked at $88.66 in November 2021 and then crashed to $15.95 in 2022 as technology stocks tumbled. Its lowest level turned into the lower side of the cup and handle pattern.
It has now bounced back and is only 15% below the upper side of the cup pattern. It has also formed the handle section this year.
Therefore, a move above the double-top’s level at $83.68 and the upper side of the cup at $88.65, will validate the C&H pattern and point to more gains.
Technicians identify the target of a cup and handle by measuring the distance between the upper and lower side of the pattern. They then measure the same distance from the upper side of the cup.
In this case, the distance between the lower and upper side of the pattern is 452%. If the index rises even by half of that, it means that the fund could soar to $290 in the coming years.
Supporting the bullish case is the fact that the TQQQ ETF has remained above the 50-week and 200-week Exponential Moving Averages (EMA), which is a positive sign.
Read more: TQQQ vs SQQQ: better ETF to buy as the Nasdaq 100 index falls?
Fundamental catalysts for the Nasdaq 100
The TQQQ ETF also has several positive catalysts that could push it higher in the coming months. First, there is the recent Donald Trump election in the United States, which will usher in an era of low regulations and taxes. Technology stocks thrive when these conditions are met.
For one, analysts believe that the deregulation aspect will lead to more mergers and acquisitions (M&A) in the technology sector.
Meanwhile, the Federal Reserve has started cutting interest rates as inflation has stabilized. It has slashed them by 0.75% this year, and analysts see more cuts in the coming months. In most periods, technology companies thrive when the Fed is slashing rates.
Additionally, companies are reporting strong earnings, signaling that there is a strong demand. For example, NVIDIA said that its revenues jumped to over $37.5 billion, beating analyst estimates. Its revenue jumped by 94% from the same period last year.
NVIDIA’s profits also continued doing well as the earnings per share rose to 81 cents, higher than the expected 76 cents.
Data by FactSet shows that the blended earnings growth was 5.4%, the fifth consecutive quarter of growth. This earnings growth will likely continue in the coming quarters, which is a positive thing.
Read more: Nvidia Q3 earnings surpass expectations as AI demand drives record revenue
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