FAS Day

FAS opened higher, then retreated back into the pennant when the market went negative around lunch. It closed near its low, so would expect more downward motion at opening tomorrow. This illustrates vividly the need for stop losses. One set just below the downward trendline would have taken one out of the position with a nibble loss. Volume continued light, below average.

Looking at FAZ, the mirror ETF for FAS, one observes an upward day as expected. Note the Stochastics (STO) indicator continued it already given buy signal through yesterday, and note, too, the tremendous divergence of the accumulation/distribution throughout this pattern. Volume was higher than yesterday and above average. The Bollinger bands have been shortened from their normal 20-days to 13-days, to see if it is going into a squeeze. It is.

From evidence from both, best action would be to await the breakout of the Bollinger squeeze or pennant, then trade accordingly. It would appear, FAZ will breakout going up, but let it prove it. The other alternative is that FAS will indeed finally test its 50-day moving average and even its lower Bollinger band. If so, that may be its bottom, which would provide a tremendously advantageous entry. One doesn't know which, but one does know that sooner or later, one of them will...