Transports IYT on the Radar

This is an open position , IYT (Transports) short at approximately a -4.02% position loss which is nothing I'm concerned about for a core short at a volatile top. The position has been built in several stages as I suspected there may have been better prices in a topping scenario which have allowed a better overall average price and less risk.

While it's way too early to make assumptions about the rest iof intraday activity, the early picture was interesting as it was very close to a Key 1-day reversal which is a strong reversal signal of a trend, also known as a reversal day, and a few other names, but the main components are a new high in the trend with a close which some define as near the lows of the day, but I prefer the textbook definition which is a close below the previous day's intraday lows which is a little different than a bearish engulfing candle as that only need to close below the real body of the previous day rather than the low which is not always one and the same.

*This is not the only potential Key Reversal Day , the early SPY and QQQ action look reminiscent of such a day as well, although it's a bit hard to imagine in front of the ECB tomorrow, even though consensus is the ECB has a lot of bark and no bite and after yesterday's near mutiny against Draghi, it's almost as if a signal was being sent just as the F_E_D sent a signal to the ECB last week at the F_O_M_C as the Euro slid right at 2 p.m., the message, "Don't go too far" and we "Noticed" the slide in the Euro.
In any case, that's what watching intraday trade and signals is all about, but their may be a trade idea coming out today in this and if some of the opening/early action is any indication on top of what we already know, numerous other assets.

The early daily candlestick chart for IYT/Transports...

 IYT made the new high required for a 1-day key reversal on the gap open and quickly moved lower filling the gap and nearly engulfing the previous Doji Star's (also a bearish candlestick reversal signal) body.

Volume should also increase on a key 1-day reversal .

The late 2013 trendline in transports has been broken, I've actually covered Transports more than just about any asset recently.

 While Broadening tops use to be very common place in the 1970's/1980's etc., less so in to the 2000's, but they remain one of the main or more common topping patterns. This particular pattern has at least the 5 pre-requisite points of contact with the trendline boundaries with a break below and our concept of a short shakeout on popular price patterns that traders react to (by shorting the initial break of the lower trendline-the same as the H&S neckline break and volatility shakeout).

Note volume in to the latest run as the move tags the upper trendline.

 Using the widest Trend Channel setting for this trend, 5-days, the entire 2013/2014 run is captured without a single stop out day until the red arrow, around the same time the 2013 trendline was broken.

Remember that it is very common to see price get very volatile after a Trend Channel stop out. The point of the trend channel is to capture the easy money or the trend, the 80% move before volatility is introduced. I've found over many years of using the Trend Channel as it was the first custom indicator I created that received an award (before 3C), that you are usually best off stopping out at a Trend Channel break, while higher prices in a volatile topping pattern are almost always available, nailing them is almost a matter of luck and more often than not, by the time the top resolves and the way in which it resolves, you are almost always better off taking your gains from the trend off the table and either putting them to work somewhere else or in cash, in other words, from experience, "I prefer to take the gains and leave the volatility and fractional potential gains to someone else".

 I've posted numerous charts of Transports so if you need links to more charts/analysis just let me know, I don''t have the time right now for a lot of redundancy, but the main chart showing a clear trend and trend change is this 60 min which was in line and confirming the uptrend iat the green arrow before the trendline was broken and a broadening top price pattern formed, the clear trend change in 3C is unmistakable. Often zooming out is the best way to get an overall feel for the asset rather than looking too close and missing the actual trend change.

As for the most recent leg which was off lows that penetrated the trendline lows, creating a bear trap, here's the id-October accumulation at the exact same dates as the broad market and industry groups as well as the distribution/negative divegrence, especially in to the 30th where things get sharply worse, ironically the same time HYG was pulled in on 1-2 min positive divergences or in other words, very short term support.

I'll have more as it develops, but a 1-day key reversal with this kind of price pattern and trend would be an amazing entry.