Trade Opportunity Case Study of the Week: SQQQ Oops Reversal – | Mar 30, 2025

The Trade Opportunity

The purpose of this weekly article is to analyze the top trading opportunity of the past week. This is to improve our identification and execution of high quality trade ideas that meet our setup requirements.

Each article will focus on a stock that meets one of three of the main categories of setups I trade:

• Range Breakout / VCP / tight area breakout
• Pullback to Support/ Key moving average
• Gapper / Post Gap Setup

These articles are like taking a step into the batting cage and loading up a historical at bat from an Ace pitcher in the world series – they will help you prepare and execute in future situations by studying important moments from the past.

The setups we cover will appear again and again in each market cycle

So far we have covered these case studies:
Previous article covering the BE Day 1 Gapper Setup
Previous article covering the AI Day 3 Gapper Setup
Previous article covering the DOCS Post Gap Range Breakout Setup
Previous article covering the ALAB Range Breakout Setup
Previous article covering the NVCR Range Breakout Setup
Previous Article on QMCO Range Breakouts
Previous Article on CRNC Episodic Pivot
Previous Article on VST 10 EMA Pullback
Previous Article on HIMS Range Breakout
Previous Article on TEM Opening Range Breakout
Previous Article on U Gapper Day 1 Setup


I also have the following Educational Articles which expand more on Setups/Entry Tactics. This is relevant to today’s discussion
Oops Reversal Entry Tactic

Please let me know in the comments what other topics you would like me to write about.

This past week the Market continued reconfirmed down after testing the 200 sma.

The QQQ this week was actually a great example of the EMA Reversal setup with the 200sma being the key level. This is why today we will be focusing on a long side trade of the SQQQ which set up an Oops reversal entry.

Discovery

When the market enters a corrective phase, if you don’t want to focus on individual names to the short side, you can choose to use inverse ETFs at selective moments to participate.

You either want to enter as the QQQ is breaking lower, or reconfirming down after a rally attempt. Volatility is higher during corrections and gap ups and rallies can be vicious. This is why you have be be more selective and I treat these more as day/swing trades than position trades.

What also makes shorting difficult is you have to flip your mentality and be able to expect breaks lower. Often the best short opportunity is off the top and likely at this point you have longs and are focused on playing defense.

Here are some labeled potential entries from the prior correction. Note how it’s more 1-3 day swings that are possible and you want to be a seller into strength quickly. Also note how there was one day where SQQQ gapped down 9% on you as the QQQ put in a positive expectation breaker. This is a good example of the dangers of shorting.

During a correction, protection is goal #1 and most traders should focus on just being in cash. Advanced traders can look to participate to the downside.

Setup and Execution

The setup for the SQQQ trade as an Oops reversal as the QQQ rallied weakly into the 200 sma level.

Here is the QQQ

And here is the SQQQ

You would want to be anticipating the weakness and potentially a large directional move through the prior day’s low on the QQQ after a failure at the 200 sma

Here is how the QQQ opened on a 5 minute. We gapped down, tried to rally back into the slight gap but then failed. At that point you would be more focused to the short side given the larger key level we were at (200sma)

The QQQ followed through down with an opening range breakdown and break of S1

Here is the SQQQ during the same time, it gapped down to S1 before rallying with an opening range breakout and trigger of the Oops reversal pivot through the prior day’s high.

These would been great low risk entries given the risk to the LOD was about 1%.

With stops like these you could take a 20% position in SQQQ and risk 0.2% of your account. This is plenty for SQQQ

You could do into this trade with the mindset of a day trader, looking to sell into extensions daily levels such as S3/S4 and/or see what cushion you have EOD for a potential multi day trade.

SQQQ did rally after the QQQ reached S3/S4 but then this base failed and SQQQ closed near highs and QQQ near lows. At the close you would have about a 4R or 4% profit enough to hold through and look for a multiday move

The next day the QQQ gapped lower but then failed at R1 as a lot of shorts who did hold overnight likely took profits. You would be up about 7R at the open on the SQQQ trade

Note how we pulled into the Pivot level and then based the rest of the day. This was a consolidation day with the short term momentum still to the downside and the intraday close in favor of shorts.

The next day we reconfirmed down and set up another opening range breakout on SQQQ with the potential for an add/new trade with a stop at the LOD of 1.5% risk.

Note how we break through R2 easily, really suggestive of market weakness.

We closed near lows and R4. This would likely be a spot to certainly take profits with the market down sharply in 3 days and more prone to a gap up. From the original entry on Day 1 profit would be about 15% or 15R

However on the QQQ we have not broken lows yet, so depending on your timeframe and profit cushion you could leave some on to continue to play the downside momentum.

Here is the action on a daily chart

And here is what the QQQ looks like. A flush through lows with a gap down would be a logical spot to lock in the SQQQ swing trade into weakness as we are more prone for a reversal up.

Here for your reference is what the QQQ looked like intraday over these 3 days. Note how it reacted to AVWAPs from prior days and to the pivot levels.