Many a wedge pattern has been spotted in my personal weekly watch list. The three main price patterns I’ve been seeing over the past couple of weeks are ascending triangles, descending triangles, and your infamous wedges. In many of the 3x inverse ETFs, the descending triangle broke apart and didn’t guide me into any continued strength. I witnessed this during my FAZ, SKF, TZA, and SRS trades, where as the trade setup looked great, but the descending triangle pattern more often than not fell through on lack of volume and momentum. Thankfully, I got out of these trades prior to them getting too atrocious.
My new found cash position, however, allows me to look objectively at these four death machines, in addition to SMNand ERY/DUG. As seen below in the Sector Search, commodity industries have been doing exceedingly well since the start of this rally:
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20-Day Sector Search (courtesy of Prophet.net)
If a lot of the wedges in commodities break down below their support trend line (or, the bottom line of the wedge) on heavier than normal volume distribution, I may consider nibbling at the inverses again if I feel like more downside momentum is to come.
My current advice? Wait for the wedge patterns to give us a short-term market direction. In my honest opinion, I think we’ll be stuck within an $SPX range this week, thus marking the beginning of our consolidation run until April 16 (if this seems like a random date, it’s not; check out the financial institutions that put out their quarterly earnings on that day). If I am correct in my thoughts on consolidation, I will stay cash until I can successfully swing trade again. This will only happen when the market chooses a side, so until then, it’s a day trader’s market.
Below is a 2-Day $SPX Market Carpet, courtesy of StockCharts.com:
2-Day $SPX Market Carpet
Top 5 Setups in the watch list include the following:
- UXG has two scenarios: A possible re-entry into the range between S1 ($2.00) and its descending triangle resistance trend line, or a continuation of a gold industry beat down that drags UXG to S2 ($1.66).
- ACI – Currently stuck in between the wedge resistance trend line and S1 ($14.21) which held nicely today. Curious to see whether ACI can break out of the wedge.
- ABX – Waiting for S2 ($27.61) retest before putting in a limit buy. I would love to catch the next gold train.
- Steel Tickers (STLD, X, SLX) – Waiting for a strong RSI-%K crossover on a 60d60m chart to initiate a trade for me. Otherwise, I’m not buying these tickers into a potential market weakness.
- B.O. Tickers (TNA, UYG, ERX) – All of these tickers have resistance levels that are very close to being broken on the slightest momentum push by the market. TNA has a resistance of $22.11 in a very strong up-trending price pattern, UYG has a resistance of $3.05 that will move strongly if the financial sector leads the market for another day or so, and ERX has a resistance of $28.68 with a lot of MA levels to bounce off of if Crude brings the heat this week.
Keep your eye on the B.O. Tickers. These are must-buys if the market pops once more. When the steam begins to diminish, however, UXG is my number one pick to go long with. Another thing to wait for when the steam subsides is the VIX to move a large amount in a matter of days, leading most people in the direction of buying things short.
Heads on a swivel my friends, heads on a swivel.
ZM
