In my last post on FAZ I modeled that wave 1 of the new bear market in financials had already played out and that wave 2 was almost complete. I was expecting 3rd wave action to kick off at any time. Check out the recent FAZ chart. It is indeed breaking out as expected. In fact, it was so strong that it would not even allow a 5th wave throw under on the ending diagonal into wave 2 - something that is pretty rare these days. The chart first broke the resistance of the orange inclining line and then smashed through "with gusto" the blue declining resistance line. Next major resistance will be at $21 which is where the undrawn resistance line from the Feb peak through blue 1 would run if extended all the way to today. A kiss of that level, slight pullback then gap-smash through it will tell the market that a new sentiment is building in the herd and that a stampede is coming.
Don't think you have missed the boat on this one yet. This party is just getting started. A break below the blue line would give significant cause for pause. A break below blue 2 would completely invalidate this model. I don't see either of those things happening but fear and discipline MUST be maintained even when things are going my way. Even though I have the king and rook against the market's king, my win can escape me if I become complacent or careless.
I expect to make, at a minimum, 10x on FAZ. $20 -> $200. Perhaps as much as 15x or more. Yes, the bubble is that big. When the air comes out of it (and that time could well be upon us right here, right now if this turns into a walk away May) these ultrashorts will do very, very well.
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