Today, I’ll review the recent ultra shorts that we’ve added to our model portfolio. It was a spectacular day for the down side market and the ultra shorts on the upside today, so I want to give you an update.
Direxion Daily Large Cap Bear 3 X (BGZ) has been in a dramatic down trend for months. It had dropped from 42 down to 20 since July alone. In mid-September it reached a bottoming point, retested, ran up on strong volume, rolled over and retested again to fortify and widen the base pattern, making it more viable for a bigger move. As they say, “The bigger the base, the bigger the move.”
Today was a definitive day because the stock broke up through the lateral price resistance. It spent several hours consolidating before a late burst in the last 15-20 minutes. It broke out above the 23 range. For the session, BGZ was up 1.66 or 7 3/4% on solid volume of nearly 14 million shares traded.
The 15-minute chart shows that it closed right at overhead resistance above the declining topsline but right at lateral price resistance. It goes back a couple of months. That’s a key area. If it can break through tomorrow, it could move up towards the 24.90-25 zone. From there the next target beyond that is the 26 ½ area, which is the lateral price resistance and the major channel declining topsline. Ultimately another test of key resistance just under 28.
Direxion Daily Emerging Markets 3X Bear Shares (EDZ) has had a basing pattern form over the last couple of weeks with a bottom, a retest, and then a complete retest. All three held above the 6 3/4 level. It’s not acting as strong as the others, but I wanted to show it to you because the base is there. I would like to see this move up across the 7 3/4 range tomorrow. If that occurs, there’s a possibility of additional price movement up towards the 8 1/2 area, which is lateral price resistance, but there’s also the declining topsline to contend with around 8.00.
Direxion Daily Financial Bear 3X Shares (FAZ) had a strong performance today. It broke internal trendline a couple of days ago, retested, triple bottomed, moved up sharply and today closed about key lateral, 2-month resistance, up around the 22.55 area.
The difference between FAZ and BGZ, for example, is that it moved up and stair-stepped its way higher all day, whereas BGZ went sideways in a flag pattern and then broke out. So, this demonstrated some unique relative strength all day in terms of ultra shorts. It is now in a distinct rising channel, at least since yesterday. Strong volume at the close. Next target 24 1/4. Beyond that, it has a declining topsline just under 26, then 27 1/2 and 29 are the next levels of resistance and potential targets.
UltraShort Real Estate ProShares (SRS), unlike some of the others, despite the lower levels of the market it made a higher low and then another higher low, and has a rising base-type pattern, which is bullish. Underlying technicals are constantly moving higher and at the top of the window on both Money Stream and OBV. Resistance around the top of the channel is around 10.75, which it should reach early tomorrow. But more importantly is that the lateral resistance exists around 11-11.15 range. A breakout there could send this stock up to 13-13 1/4, which would be my next trading target, which also coincides with the declining topsline. That’s a very key area for the SRS, up around the 13.25-13.35 zone.
I also covered Direxion Daily Small Cap Bear 3X (TZA) on the chart so don’t miss it. It’s going to be interesting to see if the market follows through with the ultra shorts and see if they can spike upward and start a significant move.
