FAZ Trade Follow Up/ Set-Up

Friday I put out a trade set-up for FAZ long (3x short Financials), Trade Set-up (Swing or Longer Term ) FAZ ,  the post was the following...

"I'll have some charts out in a few minutes, but FAZ long (3x short financials) looks pretty darn good in the area for either a new position or filling out a partial position. If intraday signals hold, you can probably pick it up for *12.50 (correction-$15.50) or less, but ultimately anywhere below $16 is a choice entry so you might want to set some price alerts."

That target was nearly hit, it still could be, but as the market has these short intraday positive divergences, it should cause a pullback in FAZ (long) which offers another opportunity to get in to a new position or fill out a partial position. Again, I think anywhere below $16 is a great entry, but why not use short term momentum to your advantage.

I like FAZ for a broad Financial short so it is what I've chosen to go with for the time being. After the initial break in the market and the first counter trend bounce, you can spot individual assets (non-ETFs) that are the laggards of the group, but initially I prefer broad sector coverage without the worries about individual company fundamental surprises such as news, etc.

Here's a quick review and the charts showing the probabilities for a better FAZ long (3x short Financials/XLF) entry.

 The last partial entry in FAZ long was during this range as it looked like it was about to break down below the range (red arrow in the red trendline range), there was a head fake move or false breakdown which I used to close half of the FAZ long as it was obvious in early August that the market would bounce and with it, Financials. I had been waiting to fill out the position above the range, but XLF didn't have the strength to break above the range without first creating a bear trap and then squeeze which got XLF above the range, the area I planned on filling out the FAZ position (long) which I did (red arrow).With the market's "Chimney" head fake, XLF gained a big and offered a nice looking FAZ pullback entry which has subsequently passed, but there looks to be a second chance on today's market divergence.

 XLF deteriorated badly in to the original range on this 60 min chart and after breaking above, saw a sharp leading negative divegrence making it a pretty safe entry to fill out FAZ long above the initial range.

 I often find that the leveraged ETFs give signals earlier than the underlying (XLF), so I'm using FAA, 3x long Financials which should give the same signals as XLF and opposite FAZ (3x short financials). Here on a 10 min chart we see a timely negative divegrence right at the chimney area in the broad market, an excellent entry area for FAZ long or XLF short. This is still the main theme, however on a shorter term basis, we may still be able to get slightly better FAZ entries.

FAS 5 min is still the theme of weakness in  the area, thus FAZ looks like a nice trade on the long side.

And the FAZ 15 min chart shows it was eworth the wait to add to it as the same range that XLF was showing is seen above, it was the break below for FAZ that I wanted to add back the shares I had taken off the table early August in anticipation of just such a move.

FAZ looks good here on a more important chart, 15 min, however very short term, specifically our divegrence in the market today is the tactical second chance for a long entry at a discount.

 The 5 min chart shows a break under $15.50, an ideal area to enter FAZ and then it has run up on today's market weakness, however...

The same positive divegrence in the IWM on 1-5 min charts is showing up as a negative on FAZ on this 3 min chart meaning a short term pullback on some short term, expected market upside, can and in my view, should be used to pick up FAZ, if interested, at a discounted price as the longer term charts all look good for some decent upside.