Many might wonder why I chose to hold SDS overnight as a swing.
When I look at the chart below, my interpretation is "there is a possible long entry setting up, but the setup is not complete". Also, the long signal, if complete, would be a contr-trend trade with the initial expectation of capturing a bounce only (since the current 60 min trend is down).
Many are expecting a Head And Shoulders to develop. And yes, the pattern certainly suggests that. But it is speculative, since it is not even formed yet.
So, lets speculate some more. What if the HS pattern does not fully develop? Notice that there is also a down channel in th 60min chart below (a smaller down channel inside the larger one). That could also be what's happening. Further, we might have seen a minor break of a bear flag, and then a backtest of the break (when SPX moved up later Friday). The backtests are quite common. That is why I decided to keep my SDS over the weekend.
If the HS does not develop, charts suggest a possible move to 1067 directly from here (see chart 2).
Bearish:
Notice that there is also a down channel in th 60min chart below (a smaller down channel inside the larger one)
The RSI is pointed up, but notice also that it needs to clear 2 levels of resistance (2 trendlines)
The last 2 hourly candles are bearish (have tails)
Bullish:
The stochastic is curled up, suggesting an attempt at higher prices. MACD histogram is rising, trying to cross 0 line
RSI pointed up
If SPX gaps up on Monday, it could gap up above the mini channel resistance line.
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Also, even if SPX goes higher to about 1100/04, I still expect a move lower to 1085 then 1070, 1050 and thinking down to 921ish. So the SDS is another "early" entry (just like the TZA, that worked) for that expected move. I was daytrading the sds on Friday, and I didn't want to sell it at Friday's prices. I think that even if SDS goes lower (higher spx) on Monday that the SDS will still go a little higher before lower, allowing me to sell at a better price. If not, then I'll continue holding it as a swing. I hesitate to go long on any swings, since that's a contra-trend trade (to me) for now.
Chart 2
Note the similarities in the areas of the chart shaded in black
* ChristopherStockGuy is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. For details, see the post from SATURDAY, AUGUST 15, 2009 titled "Disclaimer".
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