TZA/EDZ Chart Requests

Here's a look at TZA, this is a small cap leveraged 3x bear ETF. It does appear to be going through a change in character which is worth noting.

First lets look at momentum. TZA started down in August when the market started heading up-a move we had predicted about 5 days before it started.

 Note the 22 day moving average and how it has flattened out to the point where price is now criss-crossing above and below it. The volume is also interesting to note. MACD, a perfect indicator for momentum has shown a clear trend and very clean transition from negative to positive.

 My crossover screen can be quite early sometimes as a base is built before real upside momentum takes off, but 2 of the 3 components have triggered and the third, the crossover in the middle window is almost there. Not until the white square on RSI did RSI ever once cross above 50.

 The Volume at price indicator is interesting at the bottom where I put the white arrow. It looks like the sell side volume occurred in the red box around price, the buy side volume which is bigger seems to have happened more recently. also note the volatility in the Bollinger Bands has narrowed considerably. This often happens before a directional move. They may very well tighten up some more. I like the looks of the transition in price and volume at price.

 ADX crossed 40 and turned down which is said by Wilder to be the sign of the end of the trend, which was obviously the downtrend. The Vortex indicator is very close to a bullish crossover.


 Here on the 30 min chart we can see 2 main positive 3C divergences both at the lows.

 On the 5 minute chart we see the distribution on Friday afternoon which is the exact opposite of the accumulation we saw in bullish plays like the SPY, so it makes total sense as this is an inverse ETF. Today we also saw a pretty positive divergence and some interesting volume action again.

 The 1 minute also shows a leading positive divergence. 3C is at the same price level equal to $15.40 while price is at $14.45-this is a leading positive divergence. If we compare this to it's closest inverse  ETF, the IWM, we see something interesting and probably not coincidental.

A leading negative divergence in TWM the ETF for the small cap heavy Russell 2000.

I'm not saying we'll see a huge upside move tomorrow, accumulation can take time, but the conditions for accumulation are there, the price trend has gone from down to lateral, there is a definite change in character that is much more bullish.

EDZ

 EDZ's transition is relatively easy to see, from a bullish descending wedge to a lateral basing type pattern. This has been the case with most wedges, instead of just reversing as they use to, they tend to build bases or tops depending on the disposition. MACD has gone into a favorable stance and recent volume has been off the scale.

 My crossover screen shows EDZ was not ready to go north after coming out of the wedge, it had to build a base, note that the crossover signal in red was only 1 of 3-so there was no long signal there. Now again, for the first time RSI has crossed 50, the custom indicator is just crossing and the price moving averages have crossed, it's very early in the signal.

 This chart has a few interesting things. In purple, rarely do I see a definable divergence in MoneyStream, here we can see an obvious one and positive at that. Volume has been on the rise recently into the breakout day. It pulled back, but I do not think that has anything to do with emerging markets and more to do with the market in general as this is an inverse ETF. ADX crossed down from 40 ending the downtrend and recently has crossed up around 20 where the start of a new trend begins.. The Vortex indicator has a positive crossover as well.

 Looking at the last 2 days pullback, note that support was found at the Swing Pivot and there's also gap support just below which in my opinion is the strongest, most dependable support/resistance.

 I'm sure you've seen the daily divergences that are quite positive. They do not lead like this to this extent without something serious going on behind the scenes.

 The hourly positive divergences are also probably familiar, note they were accumulated right at support/the price lows. Also note 3C's current position near new highs.


Here's the 1 min chart showing a couple of rounds of positive divergences today. All in all, this is a large chart pattern, very reminiscent of the 2009-wedge in the dollar that ran through 2010 and not only fulfilled the target, but surpassed it. with wedges, the rule of thumb is they retrace their base so EDZ' base sits around $65, although n argument could be made for an even larger wedge.

These are longer term patterns and they are leveraged making them difficult emotionally to trade. A swing is amplified by 2-3 x and they take some patience as they develop. It's best to have a wide stop and take on fewer shares. As always make sure your risk management is within your zone of comfortability so you can sit out any market volatility that takes place. All in all, I think both have great looking long term charts with very good reward profiles.