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.