DXD Ultrashort Dow 15-Minute Chart Textbook Island Reversal
Here is a good example of an island reversal. DXD is the 2x inverse ETF that moves opposite the Dow Industrials. Note the gap up on Monday from 52 to 54 corresponding to the Dow moving down to start the week. As the week played out, the island forms, not wanting to venture under 53. The isolated nature of the price action from Monday thru Wednesday creates the island. Then this morning, on the Draghi comments, price collapses back thru the gap to create the island reversal. Island reversal patterns can occur in the other direction as well, from bull to bear or bear to bull. The patterns are difficult to play trade-wise, simply be aware that if a large gap is left behind and an island forms as time moves along, the liklihood of an island reversal increases.
Note that Keystone's trading algorithm went short the markets at the Monday open via DXD, which is the 54 print and then exited that trade on the upside rally at today's open at 52, accounting for the loss on the last trade. The opening gap action above highlights how the ETF's, especially leveraged ETF's, can behave very dramatically and deviate strongly from the underlying. Moving forward for DXD, keep an eye on the 52.50 resistance level. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor befoe making any investment decision.
as I'm reading this I'm seeing a big green 30MIN TICK bar in its full glory +455 - patience is profitable now as its hurry up and wait today .... Thar she blows 571 tick which is exceeding previous fractal high stunning price action today. :) best trade was TSCO purchased shares at 76.4% retrace of the hammer candlestick days ago as the price bounced off the 250MA.
ReplyDeleteSeems like QE is only a week away - stimulus to the masses. Soon all the 3/9 MA's are going to be crossing on the 30 MIN charts and all the algorithms will be on accumulate setting of an high frequency trading bonanza of buying which should drive the TICK to our first reading of +1000 for the day.
MCAP, full-fledged QE3 is probably not on tap yet and will probably not occur until the CRB drops under 270. If there is no deflationary spiral beginning (since CRB is not tumbing lower), Bernanke will probably not want to use his remaining ammo. On 8/1, the Fed, and 8/2, the ECB, they will probably take lesser measures, short of the full bore coordinated QE3, but time will tell. Bernanke will extend low rates into 2015, perhaps something with Operation Twist, and Draghi may lower the rate 25 bips, that may be it. The markets would be disappointed under this scenario since lots of easing is currently being priced into the markets. Looks like we have lots of drama to watch in the days/weeks ahead.
ReplyDeletelosing data my previous post was lost this storm must be a bad one...
ReplyDeleteAm I a lunatic or what? Could this be the play see editorial on chart...
http://scharts.co/QKWfeO