Friday, September 9, 2011

$TZA: The Small Cap indicator - Inverse H&S

The markets are trading within a Flag pattern in the past month, most of the indices are in a short term uptrend channel , most of the technician believes it's mostly a "Bear Flag"... breaking down the lower line will trigger a big downtrend.
$TZA is a Small Cap Bear 3X and show us the strength of the bears.
If we look at the 1 hour chart, we can see a very nice Inverse Head & Shoulders bearish pattern..

For the traders that are not using a Technical Analysis. here is the definition of Inverse H&S:

A chart pattern used in technical analysis to predict the reversal of a current downtrend. This pattern is identified when the price action of a security meets the following characteristics: 

1. The price falls to a trough and then rises. 
2. The price falls below the former trough and then rises again. 
3. Finally, the price falls again, but not as far as the second trough. 

Once the final trough is made, the price heads upward toward the resistance found near the top of the previous troughs. Investors typically enter into a long position when the price rises above the resistance of the neckline. The first and third trough are considered shoulders, and the second peak forms the head

If we look at the chart below, we can see the Head & Shoulders with the Blue lines...if the price of $TZA breakup the Neck-Line around $52 with a large volume we can see the Brown Line Scenario for the uptrend, but if the line used as a resistance, we will have the Green Line Scenario testing a new lows and canceling the H&S pattern....
Next week is an important week for the markets, decisions should been taken about the trend...

Have a nice weekend

1hour chart

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