Pennant – Flag – Back to a pennant again. Although not playing out exactly as per the previous scenario on the 60 minute time frame, the IWM short/TZA trade is still very much intact and profitable (5.6% gain on TZA) at this point. Essentially, the shorter the time frame that one zooms down to, the more difficult it becomes to predict every minor squiggle as prices advance towards your expected target. It is a bit concerning to see price retrace as much as they have following the breakdown of such a clean bearish pennant/flag pattern but nonetheless, this trade is still not in jeopardy of failing at this point.
The initial chart shown for the TZA/TWM long/IWM short trade was the 4 hour time frame and as you can see from the previous and updated 4 hour charts below, the trade is playing out as expected when viewed on that larger time frame despite of the advance in the small cap sector today. Zooming down the updated 60 minute chart (last), IWM continues to consolidate around the support zone shown on the previous charts. At this point, my confidence remains high that this trade will play out to it’s objective but I will continue to monitor the charts closely and will communicate my thoughts, with updated stops, should the technicals convince me otherwise.
