Thursday, April 9, 2015

Still catching the falling knife on [UVXY]

I got stopped out today from UVXY twice and for a few pennies each time.  It just briefly below $12.20 in the extended trade so I decided it would be worth another swipe at the brass ring at that level.  At the very least I would expect an a-b-c sucker's bounce to the $13 range or even $13.50 before on final move down to the bottom of blue 5 as shown in the model below.

The key IMO is to have entry points that enable the use of tight stops and then not mind getting stopped out if that is what the herd must do.  Nobody can predict how much longer the DJIA and $COMPX will continue to rally without any significant correction but since I model it to be within a day or two of the end of a 2nd wave up, I want to lean toward holding UVXY at this time even knowing that the market likes to have capitulation bottoms in these things.  They need to shake out as many "buy and hold" types as possible before the reversal but they have to be careful how low to take it because they are just giving people like me a lower and lower buy point and this is eventually going to cost Mr Market(maker).

Please keep in mind that none of the recent selling has shocked me too much and in fact you can see a model in this post that suggested a bottom could occur in the $11-$12  range.  That recent unexpected double spike into blue 4, however, opens the door (but in no way assured) a move all the way down to $10.

While the bottom is unknown, the minimum bounce target of ~$20 does not change and that is why I am expending effort following this down like I am.  I also believe that there is much higher potential upside.  If the fed breathes wrong at this point I think the big players are all going to try to head for the door at once.  Until then it's all about using stops and managing risk.

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