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Exhaustion gaps according to Bulkowski:
Happens at the end of a trend on high volume.
The gap is not followed by new highs or lows, and the gap may be unusually wide.
After the gap, price consolidates or reverses direction.
Commonly occurs after continuation gaps.
Exhaustion gaps usually close within a week.
Watching the Breakout Zone in IJR
The S&P SmallCap iShares (IJR) finally caught fire with a surge and flag breakout. Even though small-cap High-Low Percent is lagging, I will treat the breakout as bullish until there is evidence to the contrary. The breakout zone around 69 becomes the first area to watch for a breakout failure. I would not view a breakout failure as bearish. It would just suggest that IJR may need more time correcting within the bigger uptrend.
***** With some broad market indexes making record highs, one would think that total mutual fund assets would be following suit. But no. As of the end of December Total Stock Mutual Fund Assets were still below the record highs set in 2015, and are failing to confirm record price highs. (These data are collected by the Investment Company Institute and are published a month in arrears. January's totals won't be available until the end of this month.)
IJR Fails to Hold Flag Break BY ART HILL
IJR fell by more than 1% as high-beta stocks led the sell off. On the price chart, IJR failed to hold its flag breakout as it moved back below the breakout zone. This is the challenge with playing breakouts. Compared to a mean-reversion strategy, risk is almost always higher when playing a breakout strategy because the entry price is invariably higher. As far as a mean-reversion strategy is concerned, the next setup will trigger when RSI(5) moves below 30.
IJR Breaks Flag Resistance
The S&P SmallCap iShares (IJR) was lagging this year because it corrected with a falling flag. RSI dipped to 32.18 last week, but did not become "oversold". Sometimes RSI does not fully cooperate and provide a nice oversold signal. This is when I look to the price chart for clues. First and foremost, the pullback over the last few weeks was always viewed as a correction within a bigger uptrend. IJR closed below 68 with a black candlestick last Thursday, firmed on Friday-Monday and then broke out on Monday. This is a four-candlestick reversal pattern - decline, stall and reverse. The breakout zone becomes the first area to watch for a failure. Thus, I think a close below 68.2 would call for a reassessment.
IJR Corrects with Bull Flag BY ART HILL
Led by weakness in retail and banks, the S&P SmallCap iShares (IJR) corrected with a falling flag over the last 12 days. I am not concerned with the break below the mid December lows because the bigger uptrend is the dominant force. Instead, I am more interested in catching an oversold bounce within this bigger uptrend. RSI is nearing oversold levels (~30) and the ETF is near a potential reversal zone (green). A move above 68.5 would break flag resistance.
Healthcare Remains an Enigma BY ART HILL
The HealthCare SPDR (XLV) is a difficult call because a few choice words could send the sector lower. It is also the weakest of the nine sectors and this means there are better choices out there right now. On the price chart, the 50-day EMA is just below the 200-day EMA, but the ETF is trading right at both EMAs. There is a slight uptrend since the November low and I am watching the breakout near 70 quite closely. A close below 69.8 would call for a re-evaluation.
Dow 25,000 coming in next 2 years!!
TQQQ going to $300/ share!
The gift that keeps giving!!
TQQQ
Thoughts on GDX / NUGT? Looking like a trend change possible. Weekly printing it's 4th green candle possibly this week and it's broken out of and retested the downward channel it's been in. Looks like a buy would have triggered on your CCI RSI trade and would already be up to 9.50 from @ a 7.00 entry.
Technical analysis is an art form and the eye grows keener with practice.
Study both successes and failures with an eye to the future.
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I love trading TQQQ..... SQQQ!!
Appreciate your thoughtful DD !
ART HILL has changed from IWM to IJR because over the last 16 years IJR has out preformed IWM.
Conclusions
The table below shows two system tests from last week and two from this week. Overall, I am impressed with the IJR system that waits for RSI to cross above 30 and then uses the Chandelier Exit (22,1). The last row highlights this system with the second highest CAR, the second lowest MDD, the second highest exposure and the highest CAR/MDD ratio. It does, however, have the lowest gain/loss ratio, but the winning percentage is quite high. Over the 16 year test period, this particular system generated 80 trades and was in the market 35% of the time (5.6 years or 67.2 months). It is not a full-time system.
Even though the results for IJR look pretty good, keep in mind that past performance does not guarantee future performance. Also keep in mind that this system will perform differently for other ETFs and stocks. The results based on taking EVERY trade and STICKING with the system, which can be hard in real life. The chart below shows IJR with an entry signal on October 18th and subsequent 4.8% decline (drawdown). There are no stops and this system does not even consider an exit until price moves above the Chandelier, which occurred right after the election. The exit triggered on 28-Nov and IJR advanced another 3-5% afterwards. The system is far from perfect, but neither are traders.
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