Bulls in Danger … FXI

Deep Kimchi Ahead ?

Even before the exit could be made in YANG, the FXI reverses this morning’s marginal highs and heads lower.

The chart below is an update of prior analysis (at this link) showing upward progress, in percent.

Less net travel with each thrust.

FXI, Daily Chart

As this post is being created, FXI price action continues to erode … signs of exhausted bulls.

FXI can’t seem to get out of its current trading range.

Each attempt fails (with less energy than before) and price action falls back into the range.

Maintaining short via YANG, YANG-22-01 (not advice, not a recommendation).

Summary

At this juncture, it’s still early in the session and price action could reverse higher.

However, it’s obvious now, barring some kind of catalyst, the area above FXI, 33.70 – 33.80, presents significant resistance.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279

How to Handle a ‘Gut Check’

Pre-Market FXI, Shows Sharply Higher Open

The daily chart of FXI below has pre-market action as the blue line.

Currently, we’re sharply higher but still below the March 30th, high.

FXI, Daily Chart

The next chart shows the March 29th, recovery high.

For the market to continue a next leg higher, obviously, it needs to penetrate that high.

Inverse (YANG) Fund Tracking Errors

At this juncture, about 30-minutes before the open, YANG is trading at 14.01 – 14.09, slightly below the 14.16, stop.

Even though FXI is not above the March 30th high (used to locate the YANG stop), the inverse fund is trading slightly below that stop level.

This is the tracking error that’s common with every leveraged inverse fund.

Trading Action

We’re either in a ‘gut check’ upward move in FXI, before reversing to lower lows, or it’s the start of a next leg up.

Words of wisdom from the late David Weis … ‘Prove it’.

If this is the next leg higher, FXI must first penetrate the March 30th, high of 33.62, then penetrate the March 29th high of 33.73.

Using that requirement (of higher highs), the plan is to partial exit YANG if/when FXI penetrates the 33.62 high and full exit at penetration of FXI: 33.73 (not advice not a recommendation).

Summary

With each price action move, FXI is successively removing the probability of repeating the same action(s).

We had a short-covering gap higher during the week of March 18th. That massive volume move is not likely to be repeated.

We now have what may be a ‘gut-check’ move testing current highs. This move would also join the ranks of price action that’s not likely to be repeated.

If FXI, is unable to move higher from this juncture, it weights the probability even more to the downside.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279

BABA … Bull or Bear ?

The Level(s) To Watch

On one hand, BABA, has launched more than 60%, off its most recent lows.

On the other hand, that launch posted the highest daily, weekly monthly, and (about to be) quarterly volume, ever.

Markets tend to come back and test wide bar, high volume areas. Just that probability alone, coupled with the unprecedented volume behavior on four timeframes, points it to the bear side.

Shorting China FXI, via YANG, discussed yesterday (not advice, not a recommendation), is essentially a BABA short as that equity is weighted more than 10%, in the FXI.

So, let’s take a look at what BABA, is saying about itself.

BABA, Weekly Chart

The massive weekly volume highlighted below.

Next, we have a not-so good-looking picture (for the bulls).

BABA may be posting a long-term Head & Shoulders top.

Next, is the daily with its largest volume ever as well.

Getting closer-in on the daily, there are support levels to watch.

At this juncture, early in this session, we’re at support now. Breaking down puts the next, less defined support into play.

Positioning

The last post, showed what was then current positioning in FXI leveraged short vehicle, YANG (not advice, not a recommendation).

During the session yesterday, the YANG position was increased substantially. Essentially, the low-risk opportunity was used to its fullest advantage.

This method of trading goes way back to Livermore, Wyckoff and Loeb

Livermore:

Focus on the big picture and strategy. Look for the (potential) big move.

Wyckoff:

Use what the market is saying about itself to find the danger point. The point of least risk.

Loeb:

Real market opportunities are rare. When one is found, it must be used to its fullest extent.

Do NOT diversify. Focus positions and time the market.

Summary

As always, anything can happen.

BABA is currently at one of its support levels and holding for now … bulls still have a chance.

Obviously, the active trade, YANG-22-01, is taking the bearish stance. The plan is to have a tight, in-the-green stop, soon (possibly today’s low).

As this post stated at the outset, we’ve got all time high volume on four timeframes: Nearly a bearish case in itself.

The high-volume area may be tested.

That means BABA (and FXI) price action would need to move lower to perform that test.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279

China, FXI, YINN & YANG

Reposition The Short

‘Once stopped out, the amateur never comes back.’

That’s the assessment from Dr. Alexander Elder, years ago.

The amateur thinks he has special analysis powers and has to be correct on the trade immediately.

On the other, hand, the professional may attempt up to three entries (or more) to get the position they want.

So, it is with Emerging Markets (EEM) and the correlated trade, China (FXI).

Yesterday’s jump higher in both the EEM, and FXI, did not invalidate the work already done, linked here.

Instead, that move told us where to look.

As shown below, the FXI had the least net upward movement. The percentage gains have reduced substantially

FXI, Daily Chart

Using that information, FXI appears at, or near the end of its short squeeze move.

The Emerging Markets trade (once stopped out) was re-positioned to be short the FIX via YANG (not advice, not a recommendation).

YANG, Daily Chart

Upon initial glance, it appears to be a lot of (short) positioning activity. That may be true for now.

However, the objective is to identify a sustainable move (before it’s obvious) and then continue to build on the trade.

Summary

Note how there’s a huge downward slash in YANG, that corresponds to the sharp short squeeze move in FXI.

From a risk standpoint, one way to look at this event, it’s not likely to happen exactly this way again (rule of alternation).

We’re about 20-minutes before the open.

YANG, is trading higher in the pre-market by + 0.25-pts, or about + 1.61%.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279