Thursday, April 15, 2010
Moth to a light bulb..
This is the envelope chart that I was following today and I interpreted it wrong and paid a small price. As soon as FAS hit 105.48 the top channel of the envelope I couldn't wait, I shorted FAS and was thinking this is it I caught the exact top. Nah! It wasn't. FAS kept going higher and higher and I had to bail at 116.48. I lost a full dollar. It is never a good idea to pick a top and never a good idea to short when the drums were beating loud and clear (JPM earnings are great) attracting buyers. The top is a flat formation even near the end and close to the top of the envelope. V type tops are rare and when they happen they are quick in piercing the top line. Nonetheless we are getting closer. I do not honestly know when. Everything points to soon very soon. I am just going to wait to short. At least a DMRM has to happen.
The chart on the right FAZ 60 minutes from Feb 5th. The RSI was a low 15.65 meaning FAZ is way over sold. I have marked low RSI's and FAZ lows on the chart. ETFs can continue to drift lower even with very low RSI. Meaning a capitulation hasn't happened and panic selling can quite often follow when RSI is already very low. Another interesting thing that has been happening in FAZ is that it rallies a small bit just enough to release the oversold conditions. Then the bigger trend takes over and FAZ continues lower.
I am still bullish and will unload very small amount of longs but am not going to short without a signal.
Posted by Dino at 12:00 AM