09.11.2022
Let's check in on the trade.
Key Takeaways
Our position is showing a small profit.
Price started the week bearish and became indecisive by week's end.
We tightened up our buy-stop as this week's inflation data will likely drive markets one way or the other.
Trade Management
On September 3rd, we analyzed the ETF TLT. Click here to read that analysis. One of the key takeaways was, "Despite the message from the monthly and weekly charts, the daily chart does offer a reasonable reward to risk if we are interested in taking a small starter position." That is exactly what we did.
Our original plan was to enter short at around $110.22. Our target was $101.70, previous resistance from 2003 to 2011. Our Stop was $113.35, above potential gap resistance. Here was the setup as initially outlined:
TLT Daily: Before The Trade. Click to enlarge.
The last daily candle printed above is from Friday 09.02.2022. Labor Day provided us a three day weekend, and the chart below shows our entry and how the shortened week unfolded.
Our fill was much lower than planned as price gapped down Tuesday morning. We were filled near the high of the day at $108.88. Price pressed lower and printed a nice bearish candle of the Marubozu variety. Wednesday opened higher. Sellers eventually overwhelmed buyers and the gap from Friday to Tuesday proved to be, at least temporary, resistance. Thursday was similar to Wednesday in that the gap resistance held again. Thursday's candle closed at its low as did Tuesday's. Friday's candle was a high-waved doji. It represents indecision and confusion. The battle resulted in an equilibrium. The close and open were about equal and just above center of the day's high to low range. Of note, we closed above June's absolute low but below June's closing low .The message from last week's price action was bearish to neutral.
It is good news that we closed the week below June's closing low, though not its ultimate low.
It is good news that Tuesday's gap down held as resistance twice.
The candles' volatility contracted as the week unfolded, suggesting that we will eventually get volatility expansion. We just cannot be sure in which direction that expansion will occur.
TLT Daily: First week of The Trade. Click to enlarge.
Let's add some indicators to price and see if we can learn more.
TLT Daily: First week of The Trade w/Indicators. Click to enlarge.
The green moving average is the 5-day simple. It is still sloping downwards with price below it.
Volume confirms the message from the candles, that buying and selling has reduced and is currently in an equilibrium awiting one side to take control.
Wilder's Average True Range closed this last week very close to where it closed the week before. It did fall a bit to end the week also confirming price's and volume's pauses.
Wilder's ADX saw the green ADX line push higher above 25, the Red DI- line flatten and turn up, and the blue DI+ press lower. This all suggests continued directional movement to the downside.
Lastly, let's check in on the weekly chart.
TLT Weekly: First Week of The Trade. Click to enlarge.
It looks as though the weekly chart and daily chart are aligned in their messaging.
Price has closed below June's closing low though closed just above its absolute low.
Volume was less than the prior week suggesting a pause.
Momentum continued lower and is now testing its average line from above. In order to maintain our short-term bearish thesis through next week, we want to see momentum fall below its average line.
Conclusion
TLT began the week in bearish fashion as we had hoped.
By week's end, indecision set in amongst market participants in aggregate.
While the trade does show a small profit, we tightened up the stop to $110.65, just $0.43 above our entry.
As always, thank you for reading. This article is for educational and informational purposes only. The author may or may not have a position in the securities mentioned. Read our full disclaimer here. Please reach out with any feedback or comments. I would love to know if you agree, disagree, or don't care at all. Louis@eastcoastcharts.com
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