I already have a FAZ long position (3x short Financials) and I'm fine with it, what I'm looking for and it would work whether you were interested in XLF puts, SKF (2x short financials) or FAZ (3x short financials) or even just XLF short... is this...
We are SOOO close to a natural and large head fake move, I'm setting alerts for this move and upon an alert being triggered, I'll almost certainly open an XLF April $22 Put position.
I just hope it will trigger in time before it loses ground as divergences are setting in fast there.
This is the main underlying trend in XLF/Financials on a 4 hour chart, distribution in to a pullback and accumulation sending it higher in to even heavier distribution, the yellow trendline is where I'm setting my price alerts, it's an obvious resistance level and as such, the more obvious a resistance level the more likely it see a false breakout or failed move/
The 4 hour chart's divergences already tell us that the probabilities of a breakout move being a false or failed move are very high, likely in the 85% area, the same as one of our first head fake trades, BIDU short as we figured out how Wall Street was playing the game and why.
The 30 min chart has exceptional damage like the averages from the Feb run, still look how close we are to that breakout level, I can enter FAZ or another equity short with no problem here with a little rroom on the stop, but for an options position
I want to buy a put in to price strength so the premium comes down and so I get the best entry, above that yellow line is where that happens.
15 min XLF, again compare the relative divergences (even though they are leading, but this is the heart of divergence analysis no matter what indicator you are using), 3C at A and B which are nearly identical price levels shows a VERY large difference.
The 5 min chart is making me a little nervous I might not get this chance,
but it's so close I can't see how it can't be run, especially with the same in the IWM and a few other averages...
*By the way, the IWM April $120 puts just moved to double digit gains.
This 2 min chart is what is left from Monday's divergence, but as always, new divegrnces (since Monday) start on the earliest timeframes, this divergence just never made it to the 5 min charts like most averages.
That means this 1 min leading negative is the newest divergence and obviously it's fairly strong, there are two areas, one at $22.14 which is intraday resistance above and the other 2 cents higher at $22.16 which is the long term breakout that you saw above, that is where my price alerts are set for, above $22.15 and $22.17
and that's where a put position in XLF makes the most sense.
If that were to happen, it's hard to say exactly because it looks like FAZ is holding up better than it should, but you might get something like this which may make for a slightly better FAZ entry.
A move below the yellow trendline, although for FAZ, I'd have no problem taking it here, options are different, the premium and what price is doing as well as volatility are what determine price, I need that move above to make XLF puts worthwhile.
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