Quick FAZ Update and Example...

Earlier today I posted my intensions as to how I'd likely handle some trading positions including SRTY, VXX and FAZ, I expected some drawdown in them, but wasn't too worried about it.

I just closed the SRTY position as the IWM was down 2% today, that's a nice move in SRTY and worth taking if I feel I can get in at a better area.

I didn't close FAZ, XLF was down as much as 1.56%, but I'm still okay with that short position as I said Friday, it was opened Thursday and is meant to take advantage of a larger negative trend in XLF/Financials, that's why I didn't use the leverage of options, but rather the 3x leveraged ETF (inverse ) FAZ.

Here are the charts that break it down pretty simply for FAZ, the original XLF/FAZ charts are here...

 This is FAZ 1 min intraday, you can see it's moving to a leading negative divegrence, nothing horrible, but what I'd expect on a day like today, exactly what I expected Friday.

However, FAZ was entered as a Swing or longer trade, if I was going for a trend trade I'd use less leverage and maybe just short XLF or a particular financial, if I was looking for a quick move I'd use the leverage of options to make it worthwhile, but if I don't need the leverage to make the trade worthwhile, I'd rather not worry about time decay, I'd prefer not to use options, so I'm matching the trading vehicle/asset to the trade.

The 5 min FAZ chart shows a minor relative negative divegrence, again pretty much what was expected as of Friday afternoon in the posts regarding trade management of positions like FAZ.

 However, that 5 min chart is no where near as strong as this 10 min positive leading divegrence, not only in size, in type of divergence, the longer timeframe, but also the larger footprint of the base.

The "B" is where we opened the FAZ long on Thursday of last week so a little drawdown near term isn't a concern.

Moreover, the 60 min chart's large leading positive divegrence is where the highest probabilities are with a longer trade (even longer than a swing trade), so I'm not concerned at all about FAZ.

I could make the same argument for SRTY, but there was a decent exit, there are intermediate and longer charts that show a very high probability of SRTY moving much higher and the very short term charts that show a high probability of the IWM moving up near term made it worthwhile to take what the market offered with the SRTY gains, with every intention of re-entering the position at a better price level than what it was closed at today, it's just some extra $ on an opportunity the market presented, but hasn't changed anything about expectations that I had Friday and still have today.

I hope that makes some sense, if not, feel free to email me as usual.