Trade Idea: Transports

IYT is one of the candidates from last week I was looking for a bounce in to short in to, it looks to be in just about the right spot, but I'd rather have some leverage on the position and the July options in the range I'm looking have very little volume and some huge spreads, therefore I'm going to go to the Industry Group components and look for something that looks more feasible.

As for the charts...

 On the trendline break, this heavy volume is usually taken by technical traders as a sign continuation or downside confirmation will continue the next day, however I've found from volume analysis that large volume often marks a temporary reversal point, especially if accompanied by a reversal candlestick, but on this day, I suspected it was a short term reversal, Trade Set-Up (Longer Term) IYT / Transports

We now have a nice diminishing volume bounce, I wouldn't mind if today closed on increasing volume and a Doji/Hanging man like candlestick similar to what we have now on a daily chart.

 The link above describes the trade set up and letting the trade come to us, but as you can see, there's a reason I was interested in Transports as they started to look bad a while before the set up post (those are linked in the set up post).

This is the larger volume down day and some weak positives which gave me more reason to expect a weak move to the upside we could use to short in to as we did actually call the top on 6/9, but I didn't enter any positions then.

The intraday 1 min chart tells us something about the market as a whole especially if you subscribe to Dow Theory (Transports vs Industrials, although I think the R2K is a more appropriate comparison these days than the Dow-30), it also is the kind of divergence I want to see to set up a position.

 This is the same divergence backed out to trend view so you can see it never really did confirm which is even better.

And the 5 min chart with 3C turning right before the 6/9 top as a price ROC had just taken place.

Since I'm not thrilled with the leveraged options in IYT, I'm going to look at the stocks in the industry group and see if there's a better looking set up, behind the market, the Industry group has the most directional influence on stocks within that industry so the group (above) not looking good, in fact looking like a short trade entry, should have a lot of candidates, it's just a matter of finding the right one.