A rare chart setup for a short term trade that has high odds of ending favorably with big gains and low failed trade cost.

A rare setup indeed has presented itself.  This is the kind of thing I hope to be offering as a paid service in the future. 

The chart action today in $COMPX was borderline scary.  It played the old gap at the open and then reverse and crap out game on the buy the dippers.  A little of this will be tolerated but if it happens again the herd is not going to be so gullible going forward.  The volatility was high with a total range was more than 150 points on the day.

With this kind of volatility entering the scene we should soon see the VIX and TVIX taking flight.  In the model below I show that the January market sell off was wave 1 up for TVIX.  The subsequent market recovery into mid February was wave 2.  Since then, to the non EW trader it looks like TVIX has been going sideways. I don't read it like that.  I see 5 clear waves up (1-2-3-4-5) into light blue 1.  That fell away to light blue 2.  After that, purple 1-2 and then green 1-2.  That stutter step of increasingly nested 1-2 1-2 1-2 1-2 means that at some point there will be a 3rd of a 3rd of a 3rd of a 3rd.  This is not a very common occurrence!  It's the stuff that asymmetrical bets are made of.  This is Fred Flintstone doing the old yabba dabba dabba do with his feet before the flintmobile rockets out of the scene.

All silly analogies aside, I expect this set of nested, repressed waves to bust loose with a large gap up which will send a clear message to the markets: THE PARTY IS OVER.  If my model is correct then it will peak out at a higher high than the prior black 1 of early Feb.  Now here is the good part.  If this model is correct then an inviolable floor has been building underneath the share price:

•  None of the red counts could go below black 2 (and they didn't)
• Blue 2 could not go below black 2 (and it didn't)
• Purple 2 could not go below blue 2 (and it didn't
• Green 2 cannot go below purple 2 (and it remains to be seen if that critical support level will hold).

I'm not saying that this support MUST hold.  That is arrogant and stupid.  But I am saying that my model gives a simple, actionable trigger for exiting a failed bet should it in fact fail  If Green 2 goes below purple 2 sell all TVIX and ask questions later.   Green 2 closed at $7.45 today.  Purple 2 bottomed at 7.10.  That's about a 5% spread.  So you risk up to 5% in order to gain 100% or more.  20:1 in favor of you is good odds folks.  That's the smart way to play this IMO.  That is how you get out in front of the herd.  Another reasonable play would be to wait for that gap and then buy into it.  Near the top I sell gaps.  Near the bottom, I treat them as break out events and as a buy signal.  You won't make as much gain but big gaps bring the momo crowd running like vultures to the kill.  You can mingle with the herd and be safer like that.

I want to reiterate that playing the stock market - any stock that does not produce regular, conservative dividends - is gambling and so any discussion of it must sound like you are talking about making a wager because that is exactly what you are doing.  "Investing" is a bull$hit marketing term made up by Wall Street stock salesmen in order con people into the game.  I love how they even told people it was responsible and a savings account for retirement (ALL of most people's retirements!!).  You have to admire the craftmanship of a con that promises all players more out of the system than they ever put into it even though the system does not produce anything that they have a legal claim on (unless, again, it is a dividend stock that will not just dry up once the economy rolls over.  Hint: ain't no such stock). 

WHAT A COLOSSAL CON JOB!  And what's worse, most people still believe it.  I really cringe when I think about how many people are going to wake up one morning in a cold sweat panic as they watch the numbers in their accounts that represent the savings of their lifetimes simply evaporate back into the ethereal fog of credit from whence they came.  Those fake, credit bid-up stock prices are a joke.  Facebook market cap is like 163 billion. Billion with a B.  DOLLARS!  HA HA HA HA HA!!!!  Trailing PE 104!  Fantasy forward PE of 38!  Price to sales of... get this.  Twenty One.   HA HA HA HA HA HA!  Price to book of 11!  This thing is expensive even in dot bomb terms.  I guarantee you this will collapse to sub $10 before this bust is over and even that is being generous based on the fact that they supposedly have 11 billion in cash. 


There are so many companies in the same boat that you just have to understand there is almost no place to go but down anymore.