The NASDAQ-100’s exchange-traded fund, the Invesco QQQ Trust (NASDAQ:QQQ), has reportedly entered a potential correction phase, according to technical analysis studies. The movement in volume appears to be the key indicator to monitor at this point, as it might signal the continuation or end of the current correction phase.
Technical analysis comprises statistical trends derived from trading activity, such as price movements and volume. The concept behind this approach is that the market’s history tends to repeat itself. Analysts look at past patterns and trends in the hope to forecast future movements. Although this method is not foolproof, it guides investors to make calculated decisions.
By tracking the volume movements of QQQ, market analysts have noted a possible correction phase. In the stock market trading language, a correction refers to a downward trend usually about 10% from the recent high, indicating a pause in the upward surge. It does not indicate a complete halt or reversal of the upward trend, but a temporary fall or “correction” of the over-priced shares.
While a correction might be concerning for some investors, it is perhaps more accurately described as a natural part of market oscillation. A prolonged lack of correction could create an overvalue situation, which might set up a more harmful long-term decline.
As QQQ undergoes this potential correction, the volume of shares traded will become even more critical in determining the phase’s duration and depth. If the trade volume starts drying up, it might signal to traders that a bottom is forming, and the correction period might soon be over. Conversely, if the trading volume shows no signs of lessening, it could suggest that the correction phase may be prolonged.
Given the crucial role of volume movements in this situation, investors’ eyes remain fixated on the development of QQQ’s trading volume in the coming days. Traders, therefore, are being advised to monitor the volume closely as it might hold key insights into the future behavior of QQQ.
Last modified: February 25, 2025
