FAZ: Short Candidate

By: TheWaveTrading | Fri, Jan 31, 2014
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Yesterday due to the large gap up of UPRO I missed the suggested bullish setup. Today I will have to leave early for a one day business trip hence I will not seek anymore a long entry, anyway since my preferred scenario calls for a short lived oversold rebound with a potential target for SPX in the range 1812- 1815 I am already doing some homework in choosing a candidate to short in addition to SPX. So far I decided to monitor XLF since it has unfolded a similar pattern with a 3-wave down leg, which should belong to a potential larger Zig Zag down.

If price overcomes, in the next couple of days, the 10 dma, which is located at 21.40, the "oversold" rebound could extend, as well as SPX, towards the 50 dma, which stands at 21.54. Since in my opinion we have a very sensitive equity market (Vulnerable to risk aversion) and overweight equity positions, the odds of another large down leg are large. If this is the case the next down leg could reach the 200 dma at 20.35


XLF Daily:

XLF Daily Chart
Larger Image

Therefore I will keep a close eye on FAZ. If the script goes as planned, it should now unfolding a wave (B) pullback within a Zig Zag higher from the January 15 low. If XLF is able to approach its 50 dma then most likely the wave (B) of FAZ should have further room to the downside towards the 0.618 retracement of the previous up leg and horizontal support in the range of 22.06


FAZ Daily:

FAZ Daily Chart
Larger Image

 


 

TheWaveTrading

Author: TheWaveTrading

TheWaveTrading

Contact: If you would like to contact the author, you can e-mail him at thewavetrading@gmail.com

The main objective of this project is to share my views on several markets and asset classes.

In the initial stage TWT website will be a free service.

My main focus will be the equity market with SPX being the leader but I will also follow US equity sectors, major European indices, fixed income, currencies and commodities markets.

My analysis is based upon traditional Technical Analysis, Elliot Wave guidelines and investor sentiment.

My goal is to establish the most likely path that the price of a particular asset will undertake and profit through ETF instruments both on the long and short side and mainly with leveraged ones (2 x & 3 x).

The advantage of ETF investments is that it allows getting involved in equity indices & sectors, currencies, fixed income, commodities etc.

Therefore the main purpose of TWT will be to establish investment strategies regardless if the market is in an up trend or in a down trend, leveraging the chosen scenario while managing the risk by establishing protective stop losses.

Hence I will always define the risk, I will try to let winners run the wave and I will cut the losses if my strategy is wrong.

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