Trading Is Very Hard: Here's Some Help With QQQ, ARKK and Dutch Bros

It's been twenty-four years since I took my seat on a retail trading floor, and a senior trader looked at me and said, "Buy what's going up, and sell what's going down." I didn't ask for his advice, but I'm sure I had that deer in the headlights look about me. At first, I thought this trader was being a clown and poking fun at my apparent lack of experience, but I slowly learned my lesson over a few weeks and some frustrating losses.

Trading is incredibly difficult. So don't make it harder than it already is. If you buy stocks with strong bullish momentum, the likelihood of that stock continuing higher is greater than if you were to buy a stock making new swing lows day-in and day-out.

While I can't speak for every investor, I certainly didn't expect the Invesco QQQ Trust (QQQ) to power higher the way it has these past two weeks. I never could've predicted that after closing above the 21-day exponential moving average (EMA) on March 16, the QQQ would march another 9% higher without a dip under the 5-day EMA. But that's precisely what's happened.

I haven't got a clue about how far this rally can run before we see a meaningful pullback. But one thing is for sure, as long as price is holding above a 5-day EMA, it's difficult to argue that price momentum is anything but bullish.

The thing that stood out to me most on Tuesday was the strength of the small-cap and high-growth stocks. The iShares Russell 2000 Index ETF (IWM) finally broke above $210, and the ARK Innovation ETF (ARKK) soared above its 50-day simple moving average. While I have no idea if the bottom is in for high-growth stocks, a sustained rally in ARK-like names would be a welcome sight for us momentum traders. If you're swing trading the ARKK, consider using the 5-day EMA as your dynamic stop for the next few session.

As far as individual stocks are concerned, plenty of names aren't as extended as the QQQ. Take a look at the Direxion Daily S&P Biotech Bull 3X  (LABU) .

LABU still has traffic to work through to break above $20, but the consolidation around the 21-day EMA and break above the 50-day SMA is more than enough to catch my eye. For day-trading purposes, I'll like LABU above Tuesday's high.

And how about Dutch Bros Inc.  (BROS) ? I last covered this stock on March 18 after breaking above short-term resistance. And now, with the stock exploding through resistance at $60 on monster volume, you can bet there will be a lot of eyes on this name going forward.

Frankly, this is a mean stock to trade. The intraday pullbacks can be brutal, and with so many eyes on it, the eventual move higher won't be smooth. If you're trading this stock, consider using smaller-than-usual position sizes and try to enter the name on a pullback to the 5-day EMA.

At the time of publication, Byrne had no positions in any securities mentioned.