One classic and often explosive short-sell pattern we want to be on the lookout for is that of a First Thrust Down, Snapback Rally Bombs away pattern. Below is one such example with more further in this post.
We cannot stress how important this pattern is. IF we see this same set-up transpire in the indexes over the next few days or even week/weeks we want you to be prepared and know what to do because it would be a HUGE OPPORTUNITY on the short side.
As far as INVERSE ETFs are concerned for those of you who can not short in an IRA the chart below is a good example as it would be a 1st Thrust Up, pullback off highs and away we go to the upside in those inverse ETFs. This example just so happens to be of the March 2009 lows in a nano time frequency. No matter as this pattern like more others shows up in all time frames and frequencies.
What we are looking for in the indexes is a short-term bounce and then failure. Should we get that odds favor you haven’t seen nothing yet to the downside and it would then be “Welcome to a full blown correction” in the least. Market leaders can easily get whacked 30-40% in these type of corrections. Just look at CLF up until Wednesday. That issue hit a high of 75 and over the last week or so has gone to a low of 53.
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First Thrust’s Down
Below for your viewing pleasure are a few examples of First Thrust down patterns.
As you can see in each of these cases a downside break of the pink line AFTER a snapback rally was all you needed to know.
Should this pattern show up in the indexes the long side of your account is probably going to show some serious pain.
But the short side of your portfolio will pick up the slack. And for those of you who trade in tandem with the market you’ll be having a lot of fun all the while the buy and holders get it handed to them.
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