We may have had the reversal today. As we have said in our previous posts, we were looking for a top +/- March 14th (turns out march 14th was a saturday :-)). We will pay attention to the weekends from next time. Anyways, today was one of the most shorting opportunities one can ever expect to find. The above is of the XLE. The technical formation is quite clear - a bearish rising wedge on declining volume. The put call ratio has dipped below 0.70 meaning people were scared of missing the bottom. This is OPEX week, so caution is advisable.
As for us, we made our money on the TZA calls today and were out by the end of the day for a sweet trade.
What next ? - The stochs are just descending from overbought, the daily cycle ends somewhere around 25th-27th. We are still eyeing for a potentially strong rally/ bottom in that week.
For this week, we may scalp short on any bear flag rallies.
Side Note:
- ACH popped out of the triangle today, without us. But painted an ugly topping candle. We will not chase it here. We will wait to see how the upper triangle line is treated on the pullback, which will surely occur this week.
- We would like to add a note of caution, which I think is necessary. We are in 5-of-5 by count, meaning, we will have a large rally at the end of this downleg for the next 2-3 months at least. While today was an easy shorting opportunity, shorting further on must be done with extreme caution. We are almost at the end of a 1.8 year bear market, so a large vicious rally could ensue due to panic buying. It is better to be safe than sorry. We would short very light and have tight stops. If wave 5 ends truncated, we could have immense pain. We are more enthused towards adding massacred industrial commodity stocks here.
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