DE Core Short, BEAUTIFUL Chart

You can probably figure out where I opened the DE short based on the 9% gain in the short position and the market hasn't even broke.

If you are familiar with our concepts, DE is like a text book of them and you can probably tell where I opened the position, I just show you this because as you think about what positions you may like and why, you can look for certain concepts and almost be certain that the trade will come to you.

If I entered in 2011 and I do believe we did have a short there in 2011 that was closed mid-year, even at the top I would have waited years and not been much better off today then back then, that's a lot of market risk, instead we look for the events that signal the different stages and the concepts that Wall St. uses against technical traders to our advantage as well.


"A" When you have a triangle like this large symmetrical triangle, unlike the descending or ascending triangles, the sym. triangle has no implied bias, it is a pure consolidation/continuation price pattern and depends entirely on the preceding trend to predict it's eventual breakout near the apex of the triangle.


Concept: Technical traders will treat this like a consolidation triangle and because the preceding trend was up, they'll expect an upside breakout, however a consolidation triangle is rarely larger than a month or two, ANY TRIANGLE THIS BIG IS A TOP OR A BOTTOM DEPENDING ON THE PRECEDING TREND, in this case it's a top because the rally has run out.

*Look for 5 points of contact inside a triangle before a breakout

Technical traders are too lazy to apply their own rules which would tell them "Consolidation patterns aren't this big", yet they see it and think they know what it will do and Wall St. will use that to further their own position.

"B" Technical traders expect an upside breakout, they will buy and upside breakout so Wall St. can use the higher prices and buying demand to sell in to or sell short in to, this is a head fake or false breakout.

This is certainly 1 area to enter short or to phase in to a position.

"C" A bull flag shows up after the breakout, for a technical trader EVERYTHING makes 100% sense, a bullish triangle that broke out to the upside, a bullish consolidation flag that should also breakout to the upside, this is Wall St's dream and these price patterns are no coincidence.

"D" We see a breakout from the flag, that's what retail will buy, even though the flag pattern is WAY too big to be a real bull flag, THIS IS THE SECOND HEAD FAKE and you can be sure Wall St. is selling in to this as well, THIS IS ALSO WHERE I WANT TO BE SHORT AND AM.

Now that smart money has had plenty of time to distribute a large position and go short, who is left holding shares at higher prices?

What happens as those start moving to bigger and bigger losses and who will buy those shares as they try to sell them without extracting a serious price concession?

This is a text book chart to study to understand the relationship between smart and dumb money, how Technical analysis is used against technical traders, how technical traders are largely attracted to technical analysis because of laziness and how it shows above.

Just wait for Stage 4, decline, then we'll talk about "The Snowball effect" of compounding retail losses and a VERY profitable short.