Time to Get Bearish on the Nasdaq-100 via this ETF

The PowerShares QQQ Trust (NASDAQ:QQQ) is a unit investment trust that holds all of the component securities of the Nasdaq-100 Index. Its performance generally corresponds with the price and yield of the Nasdaq-100 Index.

The QQQ has been up eight out of 10 days since the Oct. 4 lows, with a move of about 15% in that time frame — nearly doubling the move of the S&P 500.

Note, though, that the four-day Relative Strength Index (RSI) is now pushing 90, which has been a harbinger of short-term tops in the past. Additionally, the 14-day Detrended Price Oscillator (which aims to zero in on stocks’ trading cycles rather than price trends) is approaching four, while the QQQs are trading at an extreme to their 50-day moving average.

Both of these metrics have been reliable indicators of overbought conditions in the past.

This chase for higher-beta names (that are more volatile than the market itself), vis-a-vis the QQQs, has never ended well in the past. Given my neutral outlook on stocks subsequent to the recent voracious rally, combined with the dramatic outperformance of the QQQs versus the S&P 500, I’m looking for QQQ to pull back to the 50-day moving average of $54 by year-end.

Based on PowerShares QQQ Trust’s current market price of $57.27 and using a target price of $54, a target date of Dec. 30, 2011, and $1,000 of investment capital, this is a great candidate for a short-term options trade.

To play this with options, visit TradingBlock.com, create a free Instant Login and try the TradeBuilder feature. Input the ticker, target price and date, and investment amount, and you�ll see several ways to trade that include buying a January put spread, selling the stock, or using some more-advanced strategies.

Best of all, you can see a potential profit-and-loss outline for each strategy. If you set up an account, you can hit the �Trade� button on your preferred strategy and be on your way! Create your free login, and get access to these QQQ option trading strategies by visiting the TradeBuilder here.