The QQQ ETF continued its strong rally, a trend that may continue on Wednesday after Oracle published strong financial results. The fund, which tracks the Nasdaq 100 Index, was trading at $580, up by over 44% from its lowest level this year. So, will the ETF continue it bull run or is a pullback coming.
Oracle stock surge to boost the QQQ ETF
The Nasdaq 100 Index and its related ETFs will likely continue the uptrend in the near term. The main driver for this is the latest Oracle earnings, which helped to propel its stock up by 28% in the extended hours.
These results showed that Oracle is becoming a major player in the cloud computing industry, which has been dominated by companies like Amazon, Google, and Microsoft in the past few years.
One reason for this is its partnership with OpenAI, which entered a deal with the company earlier this year. Estimates show that the deal could be worth over $30 billion annually.
The company has also won customers like Cohere, Circles, Mithril, Numenta, and Generalist, among others. Consequently, its remaining performance obligations jumped by 360% YoY to $455 billion.
Oracle’s revenue jumped by 12% in the last quarter to $14.9 billion. All these helped to drive its share price up by over 28%.
The results mirrored those of Broadcom, which has jumped recently, pushing its market cap to over $1.58 trillion. Broadcom soared after it inked a deal with OpenAI for its AI chips.
Federal Reserve interest rate cut
The other bullish catalyst for the QQQ ETF is that the Federal Reserve will cut interest rates by 0.25% on Wednesday next week.
Odds of a cut have jumped in the past two months as the US published weak jobs numbers recently. An economic report showed that the economy added over 73k jobs in July and 22,000 in August, confirming that the labor market was softening.
Jamie Dimon, who heads the biggest bank in the US, has also warned that the US was heading towards a recession this year because of Donald Trump’s tariffs.
The risk, however, is that such a recession will happen at a time of high inflation rate, making it a stagflation. In a stagflation, the Fed normally leans toward its dual mandate. In this case, it will lean on a rate cut to boost the labor market.
Fed cuts normally leads to a higher stock market as investors move away from bonds.
Still, the QQQ ETF may pull back in the coming weeks for a few key reasons. First, the Fed cut may become a sell-the-news situation, where investors sell an asset after a major event happens.
The other risk is that the Nasdaq 100 Index may go through a buyers fatigue after the recent surge. One reason for this is that its current P/E ratio of 33 is much higher than the historical average of 20.
QQQ ETF stock price analysis
The daily timeframe chart shows that the QQQ ETF stock has been in a strong bullish trend in the past few months. It has moved above the important resistance level at $540, its highest level in April this year.
The risk, however, the stock could go through a mean reversion as the 200-day moving average is at $522. Also, the Relative Strength Index (RSI) have continued falling in the past few days.
Therefore, while the long-term outlook is bullish, the stock will retreat, and possibly retest the support level at $540. Such a move would be bullish as it would confirm a break-and-retest pattern, which is a common bullish outlook.
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