In the process of rallying to all-time highs, QQQ formed a 3-week H&S top. The following 30-minute chart shows the H&S top more clearly:
So is the top in and we're headed for another plunge? Nobody knows. It could be that this relatively small H&S top has already served its purpose. After all, it has already declined almost to the measured price target. And now the QQQ could start another strong rally to all-time highs.
But small patterns can also start huge declines. In late 2012, a 1-month H&S top started a 40% decline in the price of Apple stock.
The only thing we can control and should concern ourselves with is limiting our risk. Enter trades only at advantageous spots and quickly cut losses by using stop-loss orders.
