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The Proshares Ultra Short ETF (SQQQ) Stock Is Up 11.8% in One Month. What’s Next?

Updated: 14 Oct 2021

The ProShares UltraPro Short QQQ ETF (NASDAQ: SQQQ) stock has risen 11.8% over the past month as the Nasdaq index struggled to rally amid a broad sell-off in technology and growth stocks. So what’s next for the inverse ETF?

SQQQ is a 3X short ETF that tracks the NASDAQ’s performance to replicate the inverse of the tech-heavy index’s performance. 

As a 3x short inverse ETF, SQQQ is a high-risk investment that investors should not hold for more than a day due to the higher fees associated with the ETF and the fact that the Nasdaq index tends to rise over time.

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SQQQ tends to fall when the NASDAQ is rising, given that it is an inverse ETF, as evidenced by the chart below, which is why the recently monthly gains are impressive. 

However, I do not believe that the rally will last much longer, given the Nasdaq’s natural inclination to rally over time. 

Still, some would argue that the Nasdaq has topped since hitting a high of 15,700 in early September and has been on a downtrend since then, which is a valid argument.

Despite the concerns about the Nasdaq having reached a cyclical top in early September, we have seen recent stock market selloffs and downtrends last for short periods, which is why I am not optimistic about SQQQ’s prospects.

SQQQ surged from around $80 to a high of $160 during the March 2020 stock market crash but later erased all gains by mid-April. 

Therefore, it is pretty clear that most massive gains in SQQQ stock are accumulated during massive stock market crashes, which rarely last long. Most of the time, though, the stock is usually falling as the Nasdaq rallies higher. 

Most retail investors should avoid this inverse ETF due to the time decay feature and the high fees, which do not justify the potential gains from a falling Nasdaq.

*This is not investment advice. 

SQQQ stock price.

Tradingview chart of SQQQ stock price 14-10-2021

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