The ProShares UltraPro QQQ (NASDAQ: TQQQ) stock price has risen 146.45% since the year started, and many are wondering what comes next for the 3X leveraged ETF that tracks the Nasdaq 100 index’s performance. For comparison purposes, the Nasdaq index is up 40.97% this year.
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As a leveraged ETF, TQQQ is meant to generate three times the gains or losses of the underlying index. Given that the Nasdaq has been on a tear this year, it makes sense to see that TQQQ is up more than three times the Nasdaq, although the ETF is not meant to mimic the long-term results of the underlying index.
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All leveraged ETFs are designed to generate daily gains, and issuers such as Proshares usually warn investors that they should not expect inverse ETFs long-term results to mimic those of the underlying index as this is usually not the case except for TQQQ.
Given the massive rally in TQQQ stock, some analysts are warning that it is time to close positions in the leveraged ETF, which could further decline as the market rebalances. The main selling argument is that after a stellar first half, tech stocks and the Nasdaq are set up for a significant pullback in H2 2023.
It is prudent for investors who have capitalised on the move higher over the past six months to close some of their positions since the potential future returns may not be as high; hence, they will be risking a lot of open profits for unknown gains and, most likely, a pullback.
Analysing the Nasdaq’s historical performance in past years, when it had rallied significantly in the first half of the year, we see that the index tends to pullback in the second half of the year, which explains why analysts are urging investors to lock in their profits and exit their positions.
We could see the Nasdaq give back up to 15% of its value in the current quarter, which would translate to a pullback of about 45% or more for the TQQQ, which is why it might be a good idea to lock in profits and look for other entries after the pullback.
*This is not investment advice.
TQQQ stock price.
Proshares UltraPro (TQQQ) stock price has risen 146.45% this year. Will the uptrend continue?
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
