Trading cubes(QQQ)

Like I had written before, I am convinced the market is in an uptrend. The QQQ hit a new high on Thursday even though the NASDAQ still hasn't cleared that mark. Since the QQQ consists of the top 100 companies of the NASDAQ and it is slightly outperforming the index, it's a good sign. This brings us to the point where there should be a minor correction/consolidation. This is, in my opinion, the perfect setting for trend-trading. And I'll start doing just that on the QQQs, possibly starting Monday.

The scenario that I have in mind is as follows:

• QQQ will retract to the 37.5 level and try to establish support there. That represents the first Fibonacci retracement from the high of this year. This is also close to the previous resistance levels from mid-February, April and July. This is also the support level expected from the trendline formed by the recent advance from mid-August.
• If support holds @37.5 , then it'll advance again to a new high. If this happens I'll figure out the next resistance level. If support fails, then the next level of support is at 36.4, next at 35.7.Any fall below 36.4 will ring my alarm bells and a break below 35.7 would signal a definite reversal since it would have broken the up-trend line and also failed two support levels.
  

I have two trades in mind:

1. Buy March QQQ puts @36 on Monday, Nov 22nd. This'll limit losses in case the first resistance doesn't hold.
2. March/April QQQ calls : Will wait for the retractment to the first support level @37.5 and buy calls with a strike = $40 at the first sign of reversal.
   

Click on the charts to see bigger more readable versions with the support/resistance levels.


QQQ 1 year chart


QQQ 2 year chart

Some basic bedtime reading material on the subject of technical analysis:
http://www.stockcharts.com/education/TAindex.html
http://en.wikipedia.org/wiki/Technical_analysis

PS: I read recently a news-story that the QQQ name is being changed to QQQQ. So basically they changed the name from three-Q to ???? , whoever came up with THAT bright idea.. :)
PS1: If you still dont get it, read aloud.