UVXY / Fractals

The reversal process was something we were talking about yesterday and the reference I sometimes make to either a "U" shaped reversal process which tends to end up looking like an igloo with a chimney before it reverses or the "W" base which like a true large double bottom, now sees a lower low at the second bottom of the "W", it serves the same purpose as the chimney in the rounding top.

I've mentioned how these patterns are fractal in nature and we see them on every time frame from 1 min to weekly charts and in every asset, they are exactly what is not suppose to happen according to Technical Analysis.

I thought it would be interesting to show UVXY where it is right now and why I decided to take it now.

 On a 3 min chart or intraday scale showing today and part of yesterday afternoon, if you look close you see a "W" base which looks almost EXACTLY the same as the "W" base in QQQ or the IWM on the dates of 2/3 and 2/5 (the two days the base of the "W" was formed), the red trendline looks nearly exactly the same and last week that was the reversal part of the head fake move that set up and caused a strong upside move out of it "From failed moves come fast reversals"

However this entire section that looks like an upside down Igloo/Chimney is actually part of a bigger pattern and thus we have the fractal nature of the market.

Here's a 5 min chart of UVXY, note it too has almost a spitting image of the QQQ/IWM bottom last week with the second low forming the chimney as a lower low/head fake. That area of the chimney is the chart above.

Again the "W" pattern is reminiscent and about the same size with a larger upside down Igloo/Chimney.

That's why I like the timing of UVXY here and it has held up well the last two days vs its natural correlation.