Testing a QQQ Swing Trade Strategy

A subscriber requested review of a swing trade strategy that buys and sells Invesco QQQ Trust (QQQ) according to the following rules:

• Buy at the close when it is either Monday or Tuesday and QQQ (Close-Low)/(High-Low) is 0.15 or less.
• Subsequently sell at the close when it is higher than the prior-day high.

To investigate, to simplify portfolio cash management, we assume that there are no overlapping trades (if a position opens on Monday, another position does not open on Tuesday). We further assume that cash earns the 3-month U.S. Treasury bills (T-bill) yield when not in QQQ and that frictions for switching between T-bills and QQQ are 0.10% of trade value. Using daily high, low, close and dividend-adjusted close (to calculate returns) for QQQ and daily T-bill close during March 10, 1999 (QQQ inception) through August 5, 2021, we find that: