TNA: Approaching Its Trendline

TNA is approaching its uptrend line which goes back to the early March bottom. Its sideways movement mimics the sideways saunter of the markets in general, especially the Russell 2000 index, which TNA represents. The question, of course, is: Once the trendline is reached, will the markets and TNA break downward or upward?

Actually it is not a question we must answer in advance, but can await the markets to tell us. We can then initiate a position in TNA, if the answer is upwards, or TZA, should the answer be down. The value of being near the trendline is that one can place a stop loss very close to the entry, thus not risking much should the trade go adverse. In fact, in case of adverse development, one can simply switch to the other ETF.

It would appear from the two-day cycle of TNA may peak Monday, then dip either by Monday's market close or during Tuesday's trading. So, our answer comes soon. The dip should be at or near 29.50, with the upward target within two days at a minimum of 32.00, the top of the channel it is now trading in. Should it not stop there, the longer-term channel line is at 36.00 and rising 1/2 point per day. TNA could reach that level in as little as two days, so say, 37.00.

An alternative is that TNA will not return to test the lower channel line, but continue through the upper short-term channel boundary now at 31.60, heading towards the 36-37 level. Or, it may only return partway through the short-term channel, then turn and run hard at the upper channel line. This partial retracement is common behavior before breakouts.

Should TNA upwards not workout, TZA mirrors TNA, and should breakout upwards when TNA breaks down. The only other possibility is that both continue cycling sideways, in which case, buy the dips and sell the rips, moving between the two, making approximately 5% per day. Oh well, times are tough.