Transports / IYT

Transports are not looking good, there's a lot of momo stocks in the sector, thus it's not great for a market that has relied on squeezing these stocks the last month.

Lets just get right down to the charts (Dow-20/IYT).

First off, the daily candle for IYT is looking like a bearish Shooting Star thus far, volume is already above Friday's which is something that tends to increase the likelihood of a reversal candle being effective.

 The strategic end of the trade has to be right first, here we have a 4 hour of transports and a theme you'll see over and over again. When there's a change in character of price, a change in trend is usually right around the corner. Some of the strongest rallies have led right in to market tops and we often see momentum rate of changes in price as stocks move from one stage to the next in all 4 stages. The take-away though is where the divegrence gets extreme and it coinciding with the more extreme momentum of price.

 The 60 min chart has the same theme of a leading negative as price picks up momentum.

 The shorter charts give us more detail, this 30 min shows a positive divegrence that leads in to what I suspect is enough upside to create a short squeeze, much like the market from the mid-May bear flag.

 The 15 min chart just confirms the theme

And as we get to more tactical timeframes, the 5 min chart goes leading negative, this is what I was seeing last week when I put out a note that I thought transports were going to give out soon.

And right down to an intraday basis, leading negative on a very tactical timeframe.

I think IYT is in a very interesting spot to consider it. If you are a bit more cautious, maybe see if there's a bearish confirmation candle tomorrow, I think there's plenty of downside and this would be an excellent entry area even if you have to wait on a confirmation candle of today's possible/likely bearish reversal candle.