Wednesday, August 3, 2011

Fibonacci Madness - TNA - Sell @ $72.50(?)

Click on the chart to ENLARGE
A friend/reader wrote me today to ask how high I hoped my positions in Direxion Small Cap Bull 3X ETF (TNA) would be able to climb from here. Hummm... good question, so I decided to investigate.
For starters I decided to look at Fibonacci retracements. My goodness. That was a landmine. The chart is full of Fibonacci relationships, to my amazement.
As we now seem to be in a bear stock market, I think it unlikely TNA (or the SPX, for that matter) will be able to rebound such that it regains the 200 dma on its first attempt. That would make for a nice sell target.
It looks to me that the TNA 200 dma will be about $72.50 in a couple days. This price level also conveniently resides at the 38.2% retracement of the downleg begun on July 7. I think a 38.2% retracement is not an unreasonable expectation, all things considered. And, that would represent a 10% gain from today's closing price.
I have my GTC (Good til Cancelled) sell order now set at $72.50. Wish me luck!


  1. John,
    I'm not sure you'll need luck, you seem to be doing well with your head.
    For TNA to go to 72.50$, the S&P needs to go up about 28 points, just under 1290. That's around its 200 DMA as well. It is quite possible that it gets to 1270-1275 at least and if the jobs report is massaged in any way to combat this past week's decline then who knows?
    GTC at 72.50$ is good but I'm sure you'll keep an eye on it around 70$....

  2. Good Evening John,
    I was just about to hit the sack and thought I check your web once more. Wow. We must be thinking along the same lines. Two days ago I picked up a couple books at the library about technical analysis. One is Fibonacci Analysis by Constance Brown. I'm afraid it's way over my head, unless I had months and months to study it. Anyway, I bought a couple calls on the this morning and one yesterday. To make it short, I'll need about a 50 percent retracement to break even. After the retracement, if we get one, the market may start down again.... This is a nice chart of the levels. Thanks for doing my homework for me. M-

  3. MrM - I absolutely will keep my eye on it at around $70. For the moment, it appears the Japan intervention overnight to strengthen the dollar has succeeded - though the TSI suggests that the dollar is about to come unravelled and begin to slide. That would help my cause.

    But as the world's free market is not a free market (I sure hope somebody who writes textbooks out there is paying attention) Japan will probably start throwing money at the dollar to make sure that it gets its way and I do not get mine. Anyway, I do believe there will be a further bounce, Japan be damned, so I will wait patiently.

    Good Morning Monty:

    You can see that my paths have crossed with Constance Brown. What was particularily curious was that I immediately received unsolicited correspondence from another technical analysis guru - Andrew Cardwell - who wanted me to know that Connie used to work for him and she more or less stole his research on the derivitive oscillator and claimed it as her invention. Frankly, I could never be sure how the thing worked or why it was any better than the TSI, so I decided to just forget about it. Anyway, it is a small world indeed and filled with people needy of accolades and attention.

    I hope my Fibonacci musings help both of us.

  4. Wild Bill

    I was out of the office most of yesterday and so late in the day I tried to buy TNA at 64.00 but never got a buy. But his morning proved to be a better deal and got in at 62.56. Come on $72.50!

  5. John, can you please elaborate about how you use the MFI? What kind of decisions points do you use? I have notice that you have marked the 80 level...
    (follow up from previous comment/question)

    ...and thank you for a great blog.
    Because of you, I made 30 % in 2 weeks...

  6. Anon - well heck, I'm pleased to hear somebody is making money. Sure isn't me at the moment. LOL

    Here are some posts that demonstrate my use of MFI (10):

  7. WSJ - "mini free fall"

    "This is a fear-driven market. We're in a mini-free fall. It's not a Black Monday, or Black Thursday, but it's in pretty bad shape--all the big stocks are being liquidated," said Christian Thwaites, president and chief executive at Sentinel Investments.

    Gold and silver, which had been up on the day, reversed course as investors sold the metals to meet stock-based margin calls, traders said.”

  8. John,
    I feel your pain, sucks to have days like these.
    However, you're not holding options therefore there's no time decay. You can hold TNA indefinitely to recoup the downside.
    I've started to try out TSI method, so far so good. I'm a day-trader at heart, not too good at long-term predictions and it fits the bill, I'm adding it to my arsenal of TA.

  9. John, What are your thoughts on SSRI? Looking at the weekly it looks like we are forming the right shoulder. I am currently short SSRI and will probably hold and see what happens if we test the neckline. BTW a lot of miners are currently forming some head and shoulders patterns. I went with SSRI because I am currently bearish silver.

  10. John, it seems that the free fall of the market that you were cautioning in saturday has come much early than expected.... everyones selling like theres no tomorrow.... by the time i finished timing the dow dropped almost 100 points....

  11. MrM - thanks for the kind words. When I get a little more time later today I am going to investigate how far these bear market crashes can go and what the follow up response usually is. As bad as things appear at the moment, they never last forever. I think that's neat you are giving the TSI a good look. Feel free to email me charts of your analysis, if ever interested, and we can converse that way as well.

    TiKi -

    I'm thinking the entire mining index may be one head and shoulders pattern.

    SSRI - I have never traded that one. It's down about 9% like the other silver miners, and it sliced right through both the 50dma and 200 dma. Both the daily and weekly have a positive divergence in place - so not sure how that is going to work out. At some point soon I would think this margin liquidation panic takes a break and there will be a big bounce. But who really knows? I will cheer for you, be sure of that!

  12. Hi John,

    Terrific blog... thanks for all your great charts and insight... will be interested to hear your findings on how long these crashes can last... hang in there, the selling has to end soon...(i hope)..


  13. HELP! Mr. Wizard,
    Dear John,

    Please send me sign as to where you think this TNA trade is headed, before my head is handed to me. Today has left me confused and sore. Thanks for all your good work, Adam.

  14. Hi Adam - yeah, today was not fun for me either. I started today with two positions in the money and ended the day unbelievably under water.

    I am not panicing, however. Maybe I should be, but what good would that do?

    This is bear market stuff. The sell-offs are vicious and so are the rallies that ensue. I continue to believe that TNA will regain the 200 dma and so I am resolved to wait for that. Something will change the dynamic and price will explode higher. Over and over I have seen this happen - many times I paniced only to sell at the very bottom. I personally am going to try and NOT do that this time.

    Anyway, the pattern almost always is price moves big in one direction, then switches direction to retest the move.

    My observation of past stock bear market behavior is that the initial shocking downleg gets retested. After that, all bests are off. Then when the entire bear market is nearing a conclusion these scary downlegs bounce like yo-yos.

    No doubt tomorrow will be more of the same if the jobs report is bad - then that may very well be the actual bottom. That is what I am looking for and since you asked, I told you.

    But what is right for you I should never presume to know. I am sorry, very sorry, that you feel confused and sore.

    I wish I had a crystal ball and as we all know, I do not. But for myself, I assess the odds very high that TNA will regain the 200 dma and that is how I intend to play this.

  15. Wild Bill

    Well I spent most of the night trying to get the egg off of my face after crowing about buying at 62.56. It looks like the TSI just crossed over the 3 moving avg line. Today will be a better day!

    Also, any further analysis on TMV. It looks pretty ripe.

  16. Good Morning Wild Bill -- the jobs report announced a little over an hour ago was nice, but not likely to be a significant catalyst to reverse the damage that has been done. Unfortunately, I think the market is going to inflict more pain on the bulls (myself included) until a significant catalyst shows up. If Ben gets freaked out he may blink and hint at QE3. That would do it. Until that happens, if that happens, the market will continue to correct.

    When I see a credible buy signal for TMV or TNA or any of the others, I will post it. But for now I think it wise to stand aside. Just my opinion, of course.

  17. WOW..just WOW...i am speechless..what abear...we're extremely extremely extremely OVER SOLD on EVERY CHART in EVERY TIME FRAME..this is like 2008